Which of the following statements is true?
a. Under variable costing, direct materials and direct labor are expensed as period expenses.
b. Under variable costing, fixed manufacturing overhead is expensed as period expenses.
c. Fixed manufacturing overhead costs are treated the same under both absorption costing and variable costing.
d. Reported income under absorption costing is not affected by production level changes.
e. Under absorption costing, fixed manufacturing overhead is expensed as period expenses.

When using variable costing method, all the costs which are variable in nature is charged based on per unit basis and is not periodic in nature, as depends o quantum of production and sales.

While considering fixed cost, it is considered periodic in nature as this does not depend on quantum of production or quantum of sales, as this is fixed in terms for a period it is periodic in nature, and is treated unavoidable even at a level where no units are produced.

Thus, Statement b. is True.

marvineetesh3 marvineetesh3 · Answer 2 · 2022-03-19T09:41:31+01:00

The correct statement is that under variable costing, fixed manufacturing overhead is expensed as period expenses.

Option a and b is correct.

What is variable costing?

Variable cost is defined as those costs that vary as the quantity of the good or service when a business products change.

These cost are the aggregate of marginal costs over all units produced. They can also be believed normal costs. The variable and the fixed costs are the two component of the total cost.

Under this cost system, direct materials and direct labor are expensed as period expenses. And here, fixed manufacturing overhead is expensed as period expenses.

Therefore, options a and b are correct.

Learn more about the variable costing, refer to:

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