- variable costing
- direct costing
- marginal costing
- absorption costing
Example 2. How would ABC Company treat fixed manufacturing costs, under the absorption costing method and the variable costing method?
- Product Cost under absorption; Product Cost under variable
- Period Cost under absorption; Product Cost under variable
- Period Cost under absorption; Period Cost under variable
- Product Cost under absorption; Period Cost under variable
Example 3. The term gross margin is used in reports prepared using:
- both absorption costing and variable costing.
- absorption costing but not variable costing.
- variable costing but not absorption costing.
- neither variable costing nor absorption costing.
Example 4. Determine which costing method (variable costing or absorption costing) accounts for fixed manufacturing costs as costs of the period:
a. at the time of incurrence, or b. at the time the finished units to which the fixed overhead relates are sold.
- Absorption costing uses (a) and variable costing uses (b).
- Variable costing uses (a) and absorption costing uses (b).
- Variable costing uses (a) and absorption costing uses neither.
- Absorption costing uses (a) and variable costing uses neither.
Example 5. Why is net profit always greater in absorption costing than indirect costing? Why cost accountants use two types of costing methods i-e absorption costing and direct costing? Identify a case where absorption costing yields higher net profit than direct costing?