A basic concept of variable costing is that period costs should be currently expensed.What is the rationale behind this procedure?
A)Period costs are uncontrollable and should not be charged to a specific product.
B)Period costs are generally immaterial in amount and the cost of assigning the amounts to specific products would outweigh the benefits.
C)Allocation of period costs is arbitrary at best and could lead to erroneous decision by management.
D)Because period costs will occur whether production occurs,it is improper to allocate these costs to production and defer a current cost of doing business.

Question

Quizplus · Accepted Answer

The rationale behind currently expensing period costs is that they will occur regardless of production and it would be incorrect to allocate them to production and defer a current cost of doing business. In variable costing, only variable costs are assigned to products, and period costs are treated as expenses in the period incurred. This allows for a better understanding of the total cost of production and helps in making informed decisions about pricing and production levels.

A Basic Concept of Variable Costing Is That Period Costs