Q1SE - Horngren'S Financial And Managerial Accounting

Question

Classifying costs Classify each cost by placing an X in the appropriate columns. The first cost is completed as an example.

Absorption Costing                     Variable Costing                                                                                                                                                 Product Cost Period Cost          Product Cost Period cost                                   

 

1. Direct materials
2. Direct labor 
3. Variable manufacturing overhead 
4. Fixed manufacturing overhead 
5. Variable selling and administrative costs
6. Fixed selling and administrative cost

Step-by-Step Solution

Answer

Answer

 

The classification of cost is given in the table below.

 

Step 1: Absorption costing Vs. Variable costing

Absorption costing absorbs all manufacturing costs including fixed manufacturing overheads. Variable costing only allocates variable costs to the product, fixed manufacturing overhead is classified as a period cost under variable costing.

Step 2: Classification of cost

	Absorption Costing	Variable Costing
Product Cost	Period Cost	Product Cost	Period Cost
a. Direct materials	X		X
b. Direct labor	X		X
c. Variable manufacturing overhead	X		X
d. Fixed manufacturing overhead	X			X
e. Variable selling and administrative costs		X		X
f. Fixed selling and administrative cost		X		X