One of the disadvantages of variable costing is that it may lead management to underprice products, leading to loss of long-term profits.

Question

Quizplus · Accepted Answer

Variable costing only includes variable costs (direct materials, direct labor, and variable manufacturing overhead) in the cost of goods sold and excludes fixed manufacturing overhead, which can result in lower product costs. This might lead management to set lower prices than necessary, potentially harming long-term profitability by not covering all costs.

One of the Disadvantages of Variable Costing Is That It