Video - Absorption and Direct Costing

Question 1

Absorption costing assigns all three factors of production to inventory:

Answer 1

Direct Material
Direct Labor
Variable and fixed manufacturing OH

Question 2

The ONLY difference between variable and absorption costing concerns

Answer 2

the treatment of fixed manufacturing costs

Absorption costing is required by GAAP for external reporting

Question 3

Variable costing

Answer 3

aka direct costing

assigns only variable manufacturing costs to inventory:

direct material
direct labor
ONLY variable manufacturing OH

Question 4

Variable costing is used for

Answer 4

internal decision making