Understanding Variable Costing: What It Is and How It Works in Inventory Costing Optimization.

inventoriable cost using variable costing

Direct materials + direct manufacturing labor + variable manufacturing costs

Variable costing is a method of costing that only considers the direct variable costs of a product or service and does not allocate any fixed costs, such as overhead or depreciation. Therefore, the inventoriable cost using variable costing only includes the variable costs of a product or service that are necessary to produce or deliver it.

Variable costs typically include direct materials, direct labor, and variable overhead expenses such as utilities, maintenance, and materials handling. These costs are considered inventory costs because they are incurred in the process of producing or delivering a product or service, and they can be directly traced to specific units of output.

To calculate the inventoriable cost using variable costing, we need to add the variable costs associated with producing or delivering the product or service. This can be done by using the following formula:

Inventoriable Cost = Direct Materials + Direct Labor + Variable Overhead

For example, if a company produced 10 units of a product and the variable costs per unit were $50 for direct materials, $20 for direct labor, and $10 for variable overhead expenses, the inventoriable cost using variable costing would be:

Inventoriable Cost = ($50 x 10) + ($20 x 10) + ($10 x 10) = $800

Therefore, the inventoriable cost using variable costing for this company would be $800.

More Answers: