1) Variable costing is a managerial accounting cost concept.
Under this method, manufacturing overhead is incurred in the period
that a product is produced. Absorption costing (also known as full
absorption costing) indicates that all of the manufacturing costs
have been assigned to (absorbed by) the units of goods produced. In
other words, the cost of a finished product includes the following
costs: direct materials, direct labor, variable manufacturing
The main difference between variable costing and absorption costing is the accounting for fixed manufacturing costs. Absorption costing includes all of the direct costs associated with manufacturing a product, while variable costing can exclude some direct fixed costs. Variable costing includes all of the variable direct costs in COGS but excludes direct, fixed overhead costs.
Get Answers For Free
Most questions answered within 1 hours.