Variable costing:
A)expenses administrative costs as cost of goods sold
B)treats direct manufacturing costs as a product cost
C)includes fixed manufacturing overhead as an inventoriable cost
D)is required for external reporting to shareholders

Question

Quizplus · Accepted Answer

Variable costing treats direct manufacturing costs as a product cost, while fixed manufacturing overhead costs are considered period costs and expensed immediately. The purpose of variable costing is for internal management decision-making rather than external reporting to shareholders or financial statements. It allows for better analysis of cost behavior patterns, contribution margins, and break-even points.

Variable Costing