Question

9 which of the following statements is true regarding variable costing? multiple choice it is the required method for external financial reporting. it includes direct materials, direct labor, and variable overhead costs in product costs. it is not permitted to be used for managerial reporting. it treats overhead in the same manner as absorption costing. it makes it easier to manipulate earnings with changes in production levels.

Explanation:

• Variable costing includes direct materials, direct labor, and variable overhead costs in product costs. Absorption costing includes fixed overhead as well. Variable costing is not required for external financial reporting (GAAP requires absorption costing). It is permitted for managerial reporting. It does not treat overhead the same as absorption costing (as absorption includes fixed overhead). And it does not make it easier to manipulate earnings with production level changes (absorption costing can do that more as fixed overhead is deferred in inventory under absorption).

Answer:

It includes direct materials, direct labor, and variable overhead costs in product costs.