Absorption Costing vs Variable Costing

Variable costing is a concept used in managerial and cost accounting in which the fixed manufacturing overhead is excluded from the product-cost of production. ... It not only includes the cost of materials and labor, but also both, in which the fixed manufacturing overhead is allocated to products produced.What is the difference between absorption and variable costing? Absorption costing, also known as full costing, entails allocating fixed overhead costs across all units produced for the period, resulting in a per-unit cost. Variable costing includes all of the variable direct costs in COGS but excludes direct, fixed overhead costs.What's included in variable costing? Understanding a Variable Cost The total expenses incurred by any business consist of variable and fixed costs. ... Examples of variable costs are sales commissions, direct labor costs, cost of raw materials used in production, and utility costs.What are examples of a variable expense? By definition, a variable expense is a cost that changes depending on your production level. ... Examples of variable costs Packaging costs. Utilities, like electricity and water. Credit card and bank fees. Hourly wages and direct labor. Shipping costs. Raw materials. Sales commissions.