The primary difference between variable costing and absorption costing is

(A) in absorption costing, fixed selling and administrative costs are product costs.

(B) in variable costing, variable selling and administrative costs are product costs.

(C) in variable costing, fixed manufacturing overhead is a product cost.

(D) in absorption costing, fixed manufacturing overhead is a product cost.

Question

Business

Rocco Villegas

2 May, 14:49

The primary difference between variable costing and absorption costing is

(A) in absorption costing, fixed selling and administrative costs are product costs.

(B) in variable costing, variable selling and administrative costs are product costs.

(C) in variable costing, fixed manufacturing overhead is a product cost.

(D) in absorption costing, fixed manufacturing overhead is a product cost.

+4

Answers (1)

Know the Answer?

Yazmin Glass · Answer 1

The correct answer is letter "D": in absorption costing, fixed manufacturing overhead is a product cost.

Explanation:

Absorption costing or full costing includes all costs related to the production process like the fixed costs. Variable costing, on the other hand, only includes the variable costs from the production. Absorption costing incorporates allocating fixed overhead costs of each unit produced during a certain period.