COST ACCOUNTING
VARIABLE COSTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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its profits fluctuate with sales
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its product costs include variable selling and administrative costs
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it calculates in idle facility variation
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its product cost per unit changes because of changes in the number of units produced
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Detailed explanation-1: –Answer: B) Profit fluctuates with sales. Under the variable costing, all fixed costs incurred during the period report as expenses during the period. Fixed costs remain constant in their total value regardless of any movement in activity, as long as it is within the relevant range.
Detailed explanation-2: -A variable cost is an expense that changes in proportion to production output or sales. When production or sales increase, variable costs increase; when production or sales decrease, variable costs decrease.
Detailed explanation-3: -A variable cost is any business expense that is directly correlated to your company’s production or sales. As your sales increase, variable costs will increase. If sales or production fall, then those costs will also fall.
Detailed explanation-4: -Variable costing is a concept used in managerial and cost accounting in which the fixed manufacturing overhead is excluded from the product-cost of production. The method contrasts with absorption costing, in which the fixed manufacturing overhead is allocated to products produced.