Question

under the (absorption,variable) costing method only costs which vary with changes in production volume are assigned to products.

Answer 1

Under the variable costing method, only costs that vary with changes in production volume are assigned to products.

This means that only costs that change as the production volume changes are considered in determining the cost of the product. Fixed costs, which do not change with the production volume, are not included in the product cost under the variable costing method.

For example, let's say a company produces widgets. The variable costs associated with producing each widget might include the cost of raw materials, direct labor, and direct overhead costs, such as electricity and supplies that directly vary with the number of widgets produced. These costs are directly related to the production volume and are included in the product cost under variable costing.

On the other hand, fixed costs, such as rent, insurance, and salaries of administrative staff, do not vary with the production volume and are not included in the product cost under the variable costing method. These costs are considered period expenses and are reported separately on the income statement.

In summary, under the variable costing method, only costs that vary with changes in production volume are assigned to products. Fixed costs are not included in the product cost but are reported separately as period expenses.

The full question is:

Fill in the blank.

Under the _________ (absorption, variable) costing method, only costs that vary with changes in production volume are assigned to products.

Answer 2

Under the variable costing method, only costs that vary with changes in production volume are assigned to products.

What happens under variable costing ?

Variable costs, such as direct materials, direct labor, and variable overhead, are considered as product costs and are allocated to the cost of goods sold based on the level of production. Fixed manufacturing costs, on the other hand, are treated as period costs and are not allocated to individual products.

The absorption costing method, in contrast, assigns both variable and fixed manufacturing costs to products. This means that under absorption costing, the cost of a product includes not only its variable manufacturing costs but also a portion of the fixed manufacturing costs, which are spread across the units produced.

The full question is:

Fill in the blank.

Under the _________ (absorption, variable) costing method, only costs that vary with changes in production volume are assigned to products.