Question

The principal difference between variable costing and absorption costing centers on: a. whether selling and administrative costs should be included in product costs. b. whether variable manufacturing costs should be included in product costs. c. whether fixed manufacturing costs should be included in product costs. d. whether fixed manufacturing costs and fixed selling and administrative costs should be included in product costs.

Answer 1

Answer:

C

Explanation:

The principal difference between variable costing and absorption costing centers on: whether fixed manufacturing costs should be included as product costs.

Absorption costing includes all costs, including fixed costs, related to production, while variable costing only includes the variable costs directly incurred in production

Answer 2

Answer: The correct answer is "c. whether fixed manufacturing costs should be included as product costs.

Explanation: The principal difference between variable costing and absorption costing centers on: whether fixed manufacturing costs should be included as product costs.

Since in an absorption costing system the  fixed manufacturing costs are included in the product cost but in a variable costing system only the variable costs are included in the product cost.