Which of the following best describes how fixed cost are treated in a variable cost method?
A) They are part of the product cost
B) They are excluded from inventory cost and are treated as period costs
C) They are allocated to the product cost using a denominator-level capacity choice
D) They are classified as nonmanufacturing costs

Question

Quizplus · Accepted Answer

In a variable cost method, only variable costs are included in the product cost. Fixed costs, such as rent and salaries, are considered period costs and are expensed in the period in which they are incurred. Therefore, fixed costs are excluded from inventory cost and treated as period costs.

Which of the Following Best Describes How Fixed Cost Are