The principal difference between variable costing and absorp

The principal difference between variable costing and absorption costing centers on:

a. whether variable manufacturing costs should be included in product costs

b. whether fixed manufacturing costs should be included in product costs

c. whether fixed manufacturing costs and fixed selling and administrative costs should be included in product costs

d. whether selling and administrative costs should be included in product costs

Solution

Answer b. whether fixed manufacturing costs should be included in product costs The main difference between variable costing and absorption costing is their their treatment with fixed manufacturing costs. Under Variable Costing - Fixed manufacturing cost is not included in product costs and expensed. Under Absorption Costing - Fixed manufacturing cost is included in product costs.