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Fill in the blanks: Using variable costing, fixed manufacturing overhead costs are treated as _ costs. Using absorption costing, fixed manufacturing overhead costs are treated as _ costs.
1- period cost
2- product cost
Answer to:
1st blank - Period
2nd blank - Product
Marginal costing treats fixed costs as period costs and absorptional costing consider them part of unit cost.
the main diffrence is the fixed manufacture cost in variable is calculated is periiod cost but in absorpation is calculated is product cost
Fixed Manufacturing overheads are treated as Period costs in Variable costing as against in Absorption costing the Overhead is absorbed and hence becomes part of the overall product cost and considered as product cost.
1st blank - Period Cost
2nd blank - product cost
These are the two diffrent methods of costings for product:
Variable costing method considers only veriable costs directly associated with the manufacturing DM+DL+DO etc
Absorption costing method considers Variable costs as well allocation of Fixed costs associated.
Basic diffrence leads to diffrence in WIP closing and opening Stock of material and hence profitablity.
Period and Product cost, respectively
Using variable costing, fixed manufacturing overhead costs are treated as Period costs. Using absorption costing, fixed manufacturing overhead costs are treated as FOH (fixed overhead ) costs.
First Period Cost
Second Product Cost
