7.4 Absorption And Variable Costing

Question 1

How is the fixed portion of manufacturing overhead treated under variable costing?

Answer 1

Fixed manufacturing overhead is expensed as a period cost

Question 2

For external reporting purposes, the cost of a product must include all the costs of manufacturing it: direct labor, direct materials, and all factory overhead (both fixed and variable). This method is commonly known as

Answer 2

absorption, full costing, or full absorption costing

Question 3

Under absorption costing, total manufacturing cost per unit includes

Answer 3

both variable and fixed manufacturing costs

Question 4

Operating income

Answer 4

Sales revenue - COGS - Selling and Admin. Expenses