We cover the different ways in which variable costing and absorption costing treat fixed manufacturing overhead. Under variable costing, direct materials, direct labor, and the variable portion of manufacturing overhead are treated as product costs. So, only those manufacturing costs that vary with output are treated as product costs under variable costing. Fixed manufacturing costs are expensed as period costs. Absorption costing treats all manufacturing costs as product costs, regardless of whether they are variable or fixed. In each month, fixed manufacturing overhead cost is divided by the number of units produced to determine the fixed manufacturing overhead cost per unit under absorption costing. Knowledge Check 01 Excerpt from Areojet Corporation records for month of February: Per Unit Per Month Selling price $ 200,000 Direct materials used in production 40,000 Direct labor 10,000 Variable manufacturing overhead 2,000 Fixed manufacturing overhead $ 140,000 Variable selling and administrative expenses 20,000 Fixed selling and administrative expenses 40,000 Assuming the variable costing method is used, what is the total manufacturing costs added to work in process during the month of February? multiple choice $52,000 $80,000 $87,000 $122,000