Answer :
Final answer:
Variable costing and absorption costing handle variable and fixed overhead costs differently, impacting product cost, pricing, and profitability.
Explanation:
Variable costing and absorption costing differ in their treatment of variable overhead and fixed overhead. In variable costing, variable overhead is included as a product cost, while fixed overhead is considered a period cost.
On the other hand, absorption costing treats both variable and fixed overhead costs as part of the product cost. Variable costing focuses on the costs directly related to production volume, whereas absorption costing allocates all manufacturing costs to products, including fixed overhead.
Understanding these distinctions is crucial for companies in determining their product pricing and profitability.
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