Fixed manufacturing costs are written off as current expenses of the period in which they occurred when using
A)absorption costing.
B)standard costing.
C)direct costing.
D)differential costing.

Question

Quizplus · Accepted Answer

Fixed manufacturing costs are treated differently under different costing methods. Direct costing (also known as variable costing) treats fixed manufacturing costs as period expenses and they are written off as current expenses of the period in which they occurred. Absorption costing, on the other hand, treats fixed manufacturing costs as part of the cost of goods sold and they are allocated to products based on predetermined overhead rates. Standard costing uses predetermined rates for variable costs and fixed overhead but any variances are recorded separately. Differential costing compares the costs and benefits of different alternatives to help make decision-making easier.

Fixed Manufacturing Costs Are Written Off as Current Expenses of the Period