Question

the term variable costing is a misnomer. variable costing is a better term for the product costing method. do you agree or disagree?why

Answer 1

Variable Costing: Under Variable costing only variable manufacturing cost are included in inventories cost.

The term direct costing is misnomer for variable costing because under variable costing only direct manufacturing cost are included and all fixed direct manufacturing cost and any direct non manufacturing cost are excluded.

Product costing: It is a method used to assign a cost to manufacturing product.

The various costing methods are available:

1. Process costing
2. Direct costing
3. Job order costing
4. Throughput costing

Product cost includes both fixed and variable cost, so variable costing method is not better for product costing. Product costing is used to assign cost to products, so main method for product costing are Job costing and process costing.