Which of the following statements pertain to variable costing?
A) This method must be used for external financial reporting.
B) Fixed manufacturing overhead is attached to each unit produced.
C) The income statement not does disclose a company's contribution margin.
D) Variable manufacturing overhead becomes part of a unit's cost.
E) None of the answers is correct.

Question

Quizplus · Accepted Answer

Variable costing includes all variable costs (both manufacturing and non-manufacturing) in the cost of a unit. Fixed manufacturing overhead is not included in the cost of a unit under variable costing; it is treated as a period cost and expensed in the period incurred. This method is not used for external financial reporting, which typically requires absorption costing. The income statement under variable costing does show contribution margin, which is sales revenue minus all variable costs.

Which of the Following Statements Pertain to Variable Costing