The underlying difference between absorption costing and variable costing lies in the treatment of:
A) direct labor.
B) variable manufacturing overhead.
C) fixed manufacturing overhead.
D) variable selling and administrative expenses.
E) fixed selling and administrative expenses.

Question

Quizplus · Accepted Answer

The primary difference between absorption costing and variable costing is in how fixed manufacturing overhead costs are treated. In absorption costing, fixed manufacturing overhead is allocated to each unit produced and included in the product costs, whereas in variable costing, fixed manufacturing overhead is treated as a period cost and expensed in the period incurred.

The Underlying Difference Between Absorption Costing and Variable Costing Lies