Question

Under variable costing, fixed manufacturing overhead is: Multiple Choice applied directly to Work-in-Process Inventory. expensed immediately when incurred. never expensed. treated in the same manner as variable manufacturing overhead.

Answer 1

Answer: expensed immediately when incurred.

Step-by-step explanation:

Under variable costing, only variable costs can be apportioned to the product as product costs. This means that fixed costs have to be expensed immediately they are incurred so that they do not feature in the product costs.

It is not a widely used principle as both U.S. GAAP and IFRS don't allow for its use in financial statements. They prefer absorption costing where fixed costs are apportioned to the products created.