Under variable costing, fixed manufacturing overhead cost is treated as a product cost

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Under absorption costing, all manufacturing costs (both fixed and variable) are treated as product costs, and are included in the unit product cost. Under variable costing, only variable manufacturing costs are treated as product costs, while fixed manufacturing overhead costs are treated as period costs and are expensed in the period incurred. Therefore, the unit product cost under variable costing will exclude fixed manufacturing overhead costs, while the unit product cost under absorption costing will include them.

Under Variable Costing, Fixed Manufacturing Overhead Cost Is Treated as a Product