7 Assuming that direct labor is a variable cost, the primary difference between

Question

7 Assuming that direct labor is a variable cost, the primary difference between the absorption and variable costing is that: Multiple Choice variable costing treats only direct materials and direct labor as product cost while absorption costing treats direct materials, direct labor, and the variable portion of manufacturing overhead as product costs. variable costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixec manufacturing overhead as product costs whille absorption costing treats only direct materials, direct labor, and the variable portion of manufacturing overhead as product costs variable costing treats only direct materials, direct labor, the variable portion of manufacturing overhead, and the variable portion of selling and administrative expenses as product cost while absorption costing treats direct materials, direct labot the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs variable costing treats only direct materials, direct labor, and the variable portion of manufacturing overhead as product costs while absorption costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs

Explanation / Answer

Q7. Answer is variable costing treat only, material, labour and variable portion of manufacturing overheads as product cost, while absorption costing treats, material, labour , variable portion of manufacturing overheads and allocated portion of fixed overheads as product cost.

Explanation: Only difference in both the costing is that in Absorption costing, the fixed manufacturirng cost is also included in product cost and this is not the case in variable costing.

Q8. Answer is Choice C.

Explanation: Absorption costing income statement does not compute CM rather it shows the Gross marginn.

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