What term is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost, direct labor cost, and variable factory overhead cost?

Question

Jaxson Swanson

Mathematics

9 October, 06:54

What term is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost, direct labor cost, and variable factory overhead cost?

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Rachael Palmer · Answer 1

Variable costing

Step-by-step explanation:

The term variable costing is a concept that is used in managerial accounting. Variable costing is a type of costing methodology that includes the variable manufacturing costs. When we say variable manufacturing costs, what we mean essentially is the cost of the inputs of production that are not fixed in price. For example, the machinery are assets and are primarily under the fixed cost. Things like labor cost may not be fixed and can even vary day to day. So therefore, we do not count things like that as variable.