Which of the following statements is CORRECT? Select one o a The difference betw

Question

Which of the following statements is CORRECT? Select one o a The difference between absorption costing and variable costing is that overhead is a product cost in absorption costing but a period cost in variable costing b About 40% of companies create their published income statements using the contribution margin format. c f a company pays a variable-cost sales commission, then Manufacturing Margin is less than Contribution Margin. d At the point of indfference, variable costing net income is equal to absorption costing net income page ous activity 8

Explanation / Answer

Under variable costing, all fixed costs including fixed manufacturing overhead are treated as period costs. Only materials cost, direct labor cost, and variable manufacturing overhead cost are treated as product cost. However, under abroption costing the fixed manufacturing costs are treated as product cost. Therefore, product cost in absorption costing includes materials cost, direct labor cost, variable manufacturing overhead cost, and fixed manufacturing overhead cost.

Therefore, the correct statement is a.

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