[snowwing3731]

Is the statement correct?

Variable costing places only variable costs into products and all fixed overhead is charged to cost of good sold.

I thought in variable costing, all fixed overhead is charged to period cost not COGS….

Anyone can help my understanding? Thanks.

[jsblamer]

COGS is a period cost

B -
A - passed
R - passed
F - passed

[M.O.D.]

In variable costing, variable costs are charged to products and cogs as product costs. Fixed overhead is not charged to products, rather it becomes a total line item expense for the entire period, (a period cost) This method is not GAAP, only used for profitability analysis.

In absorption costing, required by GAAP, variable and fixed overhead are both charged to products and COGS.

I don't consider COGS a period cost, it is a reflection of the product sold, resulting in a GP margin.

The period costs are deducted from the GP.

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[Author]

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