A method of valuing inventory that includes the appropriate share of variable costs only.

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. To Top

Also know as variable costing, a method of calculating costs that involves only raw materials, direct labor and variable overhead.

Syn: variable costing.

or variable costing - provides the average variable cost for a product or process (which often depends on the volume manufactured).

The type of product costing that charges fixed manufacturing overhead immediately against the revenue of the period in which it was incurred, without assigning it to specific units produced. Also called variable costing or marginal costing.