What factor,related to manufacturing costs,causes the difference in net earnings computed using absorption costing and net earnings computed using variable costing?
A)Absorption costing considers all costs in the determination of net earnings,whereas variable costing considers fixed costs to be period costs.
B)Absorption costing allocates fixed overhead costs between cost of goods sold and inventories,and variable costing considers all fixed costs to be period costs.
C)Absorption costing "inventories" all direct costs,but variable costing considers direct costs to be period costs.
D)Absorption costing "inventories" all fixed costs for the period in ending finished goods inventory,but variable costing expenses all fixed costs.

Question

Quizplus · Accepted Answer

The difference in net earnings computed using absorption costing and net earnings computed using variable costing is caused by the fact that absorption costing allocates fixed overhead costs between cost of goods sold and inventories, whereas in variable costing all fixed costs are considered to be period costs. This leads to differences in the valuations of ending inventory and cost of goods sold, and ultimately to differences in net earnings.

What Factor,related to Manufacturing Costs,causes the Difference in Net Earnings