question archive 1) Explain the main conceptual issue under variable costing and absorption costing regarding the timing for the release of fixed manufacturing overhead as expense
1) Explain the main conceptual issue under variable costing and absorption costing regarding the timing for the release of fixed manufacturing overhead as expense
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1) Explain the main conceptual issue under variable costing and absorption costing regarding the timing for the release of fixed manufacturing overhead as expense.
2) Companies that make no variable-cost/fixed-cost distinctions must use absorption costing, and those that do make variable-cost/fixed-cost distinctions must use variable costing." Do you agree? Explain.
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Answer:
1.
The main issue between variable costing and absorption costing is the proper timing of the release of fixed manufacturing costs as costs of the period:
- at the time of occurrence, or
- at the time the finished units to which the fixed overhead relates are sold
2.
No--a company that makes a variable-cost/fixed-cost distinction is not forced to use variable costing for internal reporting purposes. It can use variable costing, absorption costing, or throughput costing.
