Multiple Choice
Which of the following costs would be included in the recorded cost of merchandise inventory under both the perpetual and periodic inventory systems?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
Multiple Choice
Which of the following is NOT considered a product cost under variable costing?
A
Fixed manufacturing overhead
B
Direct materials
C
Variable manufacturing overhead
D
Direct labor
Verified step by step guidance1
Understand the concept of variable costing: Variable costing is a method of costing where only variable costs are included in the cost of production. Fixed costs, such as fixed manufacturing overhead, are treated as period costs and are not included in product costs.
Review the components of product costs under variable costing: Product costs under variable costing include direct materials, direct labor, and variable manufacturing overhead. These costs vary directly with the level of production.
Identify fixed manufacturing overhead: Fixed manufacturing overhead refers to costs that do not change with the level of production, such as factory rent, salaries of supervisors, and depreciation of equipment. These costs are excluded from product costs under variable costing.
Compare the options provided: Direct materials, variable manufacturing overhead, and direct labor are all variable costs and are included in product costs under variable costing. Fixed manufacturing overhead is a fixed cost and is not included.
Conclude that fixed manufacturing overhead is NOT considered a product cost under variable costing, as it is treated as a period cost instead.
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