Question

Which of the following statements is true of absorption and variable costing​ methods? A. Absorption costing considers fixed manufacturing overhead to be period costs. B. Both costing methods consider fixed manufacturing overhead to be product costs. C. Both costing methods consider selling and administrative costs to be period costs. D. Variable costing considers variable selling and administrative costs to be product costs.

Answer 1

Absorption costing considers fixed manufacturing overhead to be period costs, while variable costing considers it to be a product cost.

Step-by-step explanation:

Of the given statements, the true statement regarding absorption and variable costing methods is as follows:

A. Absorption costing considers fixed manufacturing overhead to be period costs.

This means that absorption costing treats fixed manufacturing overhead as an expense that is incurred during the period, rather than allocating it to the cost of products. In contrast, variable costing considers fixed manufacturing overhead as a product cost, including it in the cost of products. Fixed manufacturing overhead costs are those costs that are fixed and do not change in accordance with the units produced.

Answer 2

D. Variable costing considers variable selling and administrative costs to be product costs.

Step-by-step explanation:

Under variable costing method all costs which are variable in nature are treated as product cost.

Therefore, even if it is selling and administrative cost also it is part of product cost under variable costing.

Although under absorption costing only directly related cost that is manufacturing cost is product cost, and no selling and administrative cost is product cost.

Thus, correct of all the above is option D