Variable Costing: A Tool for Management . Chapter Seven. Product Costs. Direct Materials. Product Costs. Direct Labor. Variable Manufacturing Overhead. Fixed Manufacturing Overhead. Period Costs. Period Costs. Variable Selling and Administrative Expenses.
Which method will produce the highest values for work in process and finished goods inventories?
a. Absorption costing.
b. Variable costing.
c. They produce the same values for these inventories.
d. It depends. . .
Harvey Company produces a single productwith the following information available:
Unit product cost is determined as follows:
Selling and administrative expenses arealways treated asperiod expensesand deducted from revenue as incurred.
Let’s assume the following additional information for Harvey Company.
Now, let’s compute net operatingincome using both absorptionand variable costing.
Since there was no change in the variable costsper unit, total fixed costs, or the number ofunits produced, the unit costs remain unchanged.