In the application of "variable costing" as a cost-allocation process in manufacturing,
A)variable direct costs are treated as period costs.
B)nonvariable indirect manufacturing costs are treated as product costs.
C)variable indirect manufacturing costs are treated as product costs.
D)nonvariable direct costs are treated as product costs.

Question

Quizplus · Accepted Answer

Variable costing is a method of cost allocation in which only variable manufacturing costs are considered as product costs, while fixed manufacturing costs are considered as period costs. Variable indirect manufacturing costs, such as direct materials, direct labor, and other costs tied directly to production volume, are treated as product costs under variable costing. Non-variable indirect manufacturing costs, such as rent, depreciation, and utilities, are treated as period costs under this method. Therefore, option C is the correct answer.

In the Application of "Variable Costing" as a Cost-Allocation Process