Under the Variable Costing Method, Fixed Production Overhead Is

question 20

Multiple Choice

Under the variable costing method, fixed production overhead is

• A) Included in inventory
• B) Expensed in the period incurred
• C) Expensed as a product cost
• D) Expensed when the inventory is sold

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Definitions:

Unit Product Cost

The combined sum of fixed and variable expenses incurred in the creation of one unit of a product.

Absorption Costing

A costing method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.

Total Gross Margin

The difference between the sales revenue and the cost of goods sold, indicating the total profitability from goods sold.

Absorption Costing

A pricing approach that encompasses all costs related to production - including direct materials, direct labor, as well as both variable and fixed overhead expenses - within the product’s cost.