The primary difference between absorption costing and direct costing is the treatment of:
A) direct material costs.
B) variable manufacturing overhead.
C) fixed manufacturing overhead.
D)direct labor costs.

Question

Quizplus · Accepted Answer

The primary difference between absorption costing and direct costing is the treatment of fixed manufacturing overhead costs. Absorption costing includes all manufacturing costs, both fixed and variable, as part of the cost of a product. Direct costing, on the other hand, only includes variable manufacturing costs as part of the cost of a product, and fixed manufacturing costs are expensed in the period they are incurred. This can lead to differences in reported profits and inventory values between the two methods.

The Primary Difference Between Absorption Costing and Direct Costing Is