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Which of the following statements about variable costing systems is true? A.    Variable overhead costs...

  1. Which of the following statements about variable costing systems is true?

A.    Variable overhead costs are treated as period costs

B.    Fixed overhead costs are treated as product costs

C.    Only direct materials and direct labor are included in total cost

D.    Fixed overhead costs are treated as period costs

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Answer #1

Answer is option D - Fixed overhead costs are treated as period costs.

Fixed costs are treated as period costs, as fixed costs remain fixed within the relevant range of production activity and it is not related to production. Hence, option D is True.

All other options are False, because -

Variable overhead costs are product costs as it variable in nature and varies with the change in production units. Hence, option A is False.

Fixed overhead costs are period cost and not product cost. Hence, this option is also False.

Not only direct materials and direct labor, overhead is also part of total cost. Hence, option C is also False.

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