1. Under variable costing, only the variable manufacturing costs are in-
cluded in product costs.
Direct materials ... $ 50
Direct labor ... 80
Variable manufacturing overhead ... 20
Unit product cost ... $150
Note that selling and administrative expenses are not treated as product
costs; that is, they are not included in the costs that are inventoried.
These expenses are always treated as period costs and are charged
against the current period’s revenue.
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