Which of the following statements is true?

(A) Variable costing treats fixed overhead as a period cost.

(B) Absorption costing treats fixed overhead as a period cost.

(C) Absorption costing treats fixed overhead as an expense in the period it is incurred.

(D) Variable costing excludes all overhead from product costs.

(E) Managers can manipulate earnings more easily under variable costing by varying the production level.

Question

Social Studies

Hugh Weiss

9 December, 14:01

Which of the following statements is true?

(A) Variable costing treats fixed overhead as a period cost.

(B) Absorption costing treats fixed overhead as a period cost.

(C) Absorption costing treats fixed overhead as an expense in the period it is incurred.

(D) Variable costing excludes all overhead from product costs.

(E) Managers can manipulate earnings more easily under variable costing by varying the production level.

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Answers (1)

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Freeway · Answer 1

(A) Variable costing treats fixed overhead as a period cost.

Explanation:

Variable costing is an important concept in accounting. Under this method, manufacturing overhead is incurred in the period that a product is produced. Variable costing includes only variable manufacturing costs (direct materials, direct labor, and variable manufacturing overhead) in unit product costs. Moreover, it treats fixed overhead as a period cost.