Use the following to answer questions:

-The difference between the variable ending inventory cost and the absorption ending inventory cost is:
A) 800 units times $15 per unit indirect manufacturing cost
B) 800 units times $10 per unit material cost
C) 800 units times $20 per unit variable conversion cost plus $15 per unit indirect manufacturing cost
D) 800 units times $20 per unit variable conversion cost plus $15 per unit indirect manufacturing cost plus . $16.67 per unit indirect operating costs

Question

Use the following to answer questions:
 
-The difference between the variable ending inventory cost and the absorption ending inventory cost is:
A) 800 units times $15 per unit indirect manufacturing cost 
B) 800 units times $10 per unit material cost 
C) 800 units times $20 per unit variable conversion cost plus $15 per unit indirect manufacturing cost 
D) 800 units times $20 per unit variable conversion cost plus $15 per unit indirect manufacturing cost plus . $16.67 per unit indirect operating costs

Quizplus · Accepted Answer

The difference between variable and absorption costing primarily lies in how fixed manufacturing overhead costs are treated. Variable costing does not include fixed manufacturing overhead in the inventory costs, whereas absorption costing does. Therefore, the difference would be related to the fixed costs (indirect manufacturing cost in this case) associated with the units in ending inventory.

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