Variable costing:

Question

Variable costing:

Quizplus · Accepted Answer

Variable costing treats direct manufacturing costs (such as direct materials, direct labor, and variable manufacturing overhead) as product costs, while treating fixed manufacturing overhead as a period cost that is expensed as incurred. Option A is incorrect because administrative costs are not included in cost of goods sold under either variable or absorption costing. Option B is incorrect because variable costing is not required for external reporting, and both variable and absorption costing are acceptable for external reporting purposes. Option C is incorrect because variable costing excludes fixed manufacturing overhead from inventory and treats it as a period cost.

Variable Costing