Which of the following statements is true for a firm that uses variable costing?
A)The cost of a unit of product changes because of changes in the number of units manufactured.
B)Profits fluctuate with sales.
C)An idle facility variation is calculated.
D)None of the above.

Question

Quizplus · Accepted Answer

With variable costing, only the variable costs are included in product costs, while fixed costs are treated as period expenses. As a result, profits will fluctuate with sales since the fixed costs will not be allocated to the products sold. A is incorrect because the cost of a unit of product may remain constant even if the number of units manufactured changes. C is incorrect because an idle facility variation is not a common calculation used in variable costing.

Which of the Following Statements Is True for a Firm