What is variable costing?

Variable costing is a costing methodology that assigns the costs of production to the products or services based on the variable costs incurred. The fixed costs are expensed in the period in which they are incurred.

What are the benefits of using variable costing?

The benefits of using variable costing include greater clarity and transparency into the costs of products and services, a more accurate assessment of profitability and performance, and a greater ability to manage costs and pricing decisions.

Are there any limitations to using variable costing?

It may not be suitable for all types of businesses or industries, it does not take into account the impact of fixed costs on profitability, and it can be more complex and time-consuming to implement than other costing methods.

Variable Cost is also known as?

Variable Cost is also known as direct costing.

What industries is Variable Costing most suited for?

Variable costing is most suited for industries that have a high degree of variability in their costs, such as manufacturing and retail. It can be less suitable for businesses with more stable or consistent costs, such as those in the service industry.

Variable Costing McQs Quiz With Answers

Test your knowledge with this set of multiple choice questions (MCQ) covering the topic of variable costing. Answering every question correctly will assist your exam preparation, interviews, and professional work. To begin, just click on the "Start Quiz" button.

1. Using absorption costing, a unit of product includes which costs?

Direct materials, direct labor, fixed overhead
Direct materials, direct labor, variable overhead
Direct materials, direct labor, variable overhead, fixed overhead
Only direct materials and direct labor

2. Using variable costing, a unit of product includes which costs?

Direct materials, direct labor, fixed overhead
Direct materials, direct labor, variable overhead
Direct materials, direct labor, variable overhead, fixed overhead
Only direct materials and direct labor

3. Variable costing is also known as:

Indirect costing
Direct costing
Marginal costing
Both (2) and (3)

4. Using the following data, determine the unit product cost under absorption costing. $\"Variable$

5. Using the following data, determine the unit product cost under variable costing. $\"Variable$

6. The difference between the unit product cost under absorption costing as compared to variable costing is:

Direct materials and direct labor
Fixed and variable portions of manufacturing overhead
Fixed manufacturing overhead only
Variable manufacturing overhead only

7. Variable costing is attractive to managers as an alternative to absorption costing because:

Absorption costing distinguishes between fixed and variable product costs
Absorption costing is well suited to CVP analysis techniques
Absorption costing provides useful tools to managers for planning and control
To generate data for CVP analysis, considerable time need to be invested to rework income statements constructed under absorption costing

8. Product cost under absorption costing is characteristically:

Higher than under variable costing
Lower than under variable costing
Equal to variable costing
Sometimes higher and sometimes lower than variable costing

9. When production is equal to sales, which of the following is true?

No change occurs in inventories for either absorption costing or variable costing
The use of absorption costing produces a higher net income than the use of variable costing
The use of absorption costing produces a lower net income than the use of variable costing
The use of absorption costing causes the inventory value to increase more than it would through the use of variable costing

10. When production is greater than sales, which of the following is true?

No change occurs in inventories for either absorption costing or variable costing
The use of absorption costing produces a higher net income than the use of variable costing
The use of absorption costing produces a lower net income than the use of the variable costing
The use of absorption costing causes the inventory value to increase more than it would through the use of variable costing

11. When production is less than sales, which of the following is true?

No change occurs in inventories for either absorption costing or variable costing
The use of absorption costing produces a higher net income than the use of variable costing
The use of absorption costing produces a lower net income than the use of variable costing
The use of absorption costing causes the inventory value to increase more than it would through the use of variable costing