A method where only the variable manufacturing costs are assigned to inventory and the cost of goods sold. Fixed manufacturing costs are viewed as expenses of the period in which they are incurred. This method is not allowed for external financial statements, but can be used internally. External financial statements must have fixed manufacturing costs allocated to the products.
Featured Review
"I am so thankful to have found the information I needed at AccountingCoach. Several years ago I became the corporate finance vice president for a new public charity. I had many years of executive management experience, but little 'hands on' accounting needed to set up the financial system and to keep the books. AccountingCoach's clear, straight-forward explanations were exactly the review material that I needed. And, I much appreciated that all of this expert and concise information was freely shared on their website. Thank you, AccountingCoach!" - Deb F.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviewsWe now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: