Variable costing is a method of manufacturing cost accounting used to place a value on the final product. Unlike absorption costing, which considers all manufacturing costs for inventory value, the variable costing method does not consider fixed costs associated with producing the final product. Different methods of inventory valuations will have varying affects on net income.
What’s Figured Into the Variable Costing Method?
Only materials, labor and variable manufacturing overhead costs and expenses associated with a finished manufactured product are figured into the determining the unit cost. The following is a list of categories that are used to determine the cost of a single unit of a finished product using the variable costing method.
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