The costing method in which only variable product costs are accumulated in inventory is called
A)Absorption costing
B)Normal costing
C)Direct costing
D)Full costing

Question

Quizplus · Accepted Answer

Direct costing, also known as variable costing or marginal costing, only accumulates variable product costs in inventory. This approach separates fixed costs as period expenses and only considers variable costs as part of the product cost. This method provides a clearer understanding of the cost behavior and helps in decision-making related to production volume and pricing. Absorption costing, on the other hand, includes both fixed and variable costs in the product cost and is required by GAAP for external reporting. Normal costing and full costing are broad terms that can refer to either absorption or direct costing methods.

The Costing Method in Which Only Variable Product Costs Are