ECONOMICS

COST ACCOUNTING

VARIABLE COSTING

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Grabengkulit Company produces a single product. Last year, the company’s net operating income computed by the variable costing method was P30, 000. The company’s unit product cost was P18 under variable costing and P20 under absorption costing. During the period, inventory decreased by 8, 000 units. The company’s income under variable costing must have been:
A
30, 000
B
46, 000
C
14, 000
D
16, 000
Explanation: 

Detailed explanation-1: -Under absorption costing, product costs include all manufacturing costs: Direct materials. Direct labor. Variable manufacturing overhead.

Detailed explanation-2: -Product costs under variable costing include only variable manufacturing costs. Absorption costing accounts for fixed manufacturing overhead as a product cost. Variable costing accounts for fixed manufacturing overhead as a period cost.

Detailed explanation-3: -The correct answer is C-direct material costs.

There is 1 question to complete.