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On a variable-costing income state­ment, the cost of goods sold is measured at variable cost, which...

On a variable-costing income state­ment, the cost of goods sold is measured at variable cost, which includes direct material, direct labor, and variable manufacturing overhead.

true or false

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Answer #1

In variable costing method, costs are a combination of direct materials, direct labor, and variable manufacturing overhead. Fixed costs along with selling and general administrative expenses are considered to be period expenses since they would be incurred irrespective of the production. Therefore they are not included in calculating the cost of goods sold.

However in case of absorption costing, fixed cost is also considered for calculating the cost of goods sold as it is considered to be a part of the total cost of production.

So the correct answer is true.

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