A common problem reported by companies using variable costing is the difficulty of classifying costs into fixed or variable categories.

Question

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Variable costing only considers variable costs as product costs, while fixed costs are considered period costs. However, sometimes it may be difficult for companies to accurately classify costs into fixed or variable categories, especially when there are mixed costs that contain both variable and fixed elements. This can create challenges in determining the true cost of production and making informed decisions about pricing and profitability.

A Common Problem Reported by Companies Using Variable Costing Is