The one primary difference between variable and absorption costing is that under
A) variable costing, companies charge the fixed manufacturing overhead as an expense in the current period.
B) absorption costing, companies charge the fixed manufacturing overhead as an expense in the current period.
C) variable costing, companies charge the variable manufacturing overhead as an expense in the current period.
D) absorption costing, companies charge the variable manufacturing overhead as an expense in the current period.

Question

Quizplus · Accepted Answer

Under variable costing, fixed manufacturing overhead is treated as a period cost and is not included in the cost of the product. In contrast, under absorption costing, fixed manufacturing overhead is included in the cost of the product as a product cost. Thus, the primary difference between variable and absorption costing is the treatment of fixed manufacturing overhead.

The One Primary Difference Between Variable and Absorption Costing Is