Under variable costing:
A)Only the quantity of products sold determines cost of goods sold.
B)Only the quantity of products produced determines cost of goods sold.
C)Both the quantity of products produced and sold determines cost of goods sold.
D)Neither the quantity of products produced or sold determines cost of goods sold.

Question

Quizplus · Accepted Answer

Under variable costing, only the direct variable costs (such as direct materials, direct labor, and variable manufacturing overhead) directly associated with the production of a unit are included in the product cost. Fixed manufacturing overhead costs are treated as period costs and are expensed in the period incurred. Therefore, the cost of goods sold is based solely on the quantity of products sold, as only the variable costs associated with those units are included in the cost of goods sold calculation.

Under Variable Costing