Which of the following costs would be included in the cost o

Which of the following costs would be included in the cost of a manufactured product according to the vari- able costing concept: (A) rent on factory building, (B) direct materials, (C) property taxes on factory building, (D) electricity purchased to operate factory equipment, (E) salary of factory supervisor, (F) depreciation on factory building, (G) direct labor?

Solution

Ans (B) and (G)

Variable cost is also a direct cost for manufacturing.

Under variable costing system only variable cost of manufacturing is treated as product cost.

Variable cost under variable costing includes

Direct Material

Direct Labor

Variable Manufacturing cost

Fixed Overhead is not considered while calculating Product cost under variable costing system.

Variable Cost

Direct Material

Direct Labor

Fixed Cost

Rent on Factory Building

Property Taxes on Factory Building

Electricity purchased to operate factory equipment

Salary of Factory supervisors

Depreciation on Factory Building