1. Overhead Application: Variable and Absorption Costing

2. 15 - 2

3.  The differences between variable-costing and absorption-costing methods are based on the treatment of fixed manufacturing overhead. 15 - 3

4. 15 - 4 -Variable costing excludes fixed manufacturing overhead from inventoriable costs. -Absorption costing treats fixed manufacturing overhead as inventoriable costs.

5. -The fixed-overhead rate is the amount of fixed manufacturing overhead applied to each unit of production. -It is determined by dividing the budgeted fixed overhead by the expected volume of production for the budget period.

6.  Under absorption costing, fixed overhead appears in the cost of goods sold.  Under variable costing, fixed overhead is a period cost. 15 - 6