The One Primary Difference Between Variable and Absorption Costing Is

question 21

Multiple Choice

The one primary difference between variable and absorption costing is that under

• A) variable costing, companies charge the fixed manufacturing overhead as an expense in the current period.
• B) absorption costing, companies charge the fixed manufacturing overhead as an expense in the current period.
• C) variable costing, companies charge the variable manufacturing overhead as an expense in the current period.
• D) absorption costing, companies charge the variable manufacturing overhead as an expense in the current period.

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Definitions:

Direct Cost

A cost that can be directly attributed to the production of specific goods or services, such as raw materials and labor.

Period Cost

Expenses incurred by a business that are not directly tied to the production process, often including administrative and sales expenses.

Direct Materials

Raw materials that are directly used in the production of a product, easily traceable to the finished product.

Bakery

A place where bread, cakes, cookies, and other baked goods are made or sold.