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James company uses absorption costing and Barry company uses variable costing. Which of the following costs...

James company uses absorption costing and Barry company uses variable costing. Which of the following costs would be treated differently by James and Barry and why?

Direct Labor -

Manufacturing Overhead -

Fixed Administrative Costs -

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Answer #1

Out of the three costs mentioned below, Manufacturing overhead would be treated differently by James Company & Barry Company.

Variable costing method & absorption costing method treat manufacturing overhead differently.

Under variable costing method, manufacturing overhead is recognised in the period in which it is incurred irrespective of the fact that it may not be sold in the same period but in a later period.

Under absorption costing method, manufacturing overhead is recognised in the period in which the goods on which it is incurred is sold.

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