Which of the following best explains how selling and administrative expenses are recognized under both...

Selling and administrative expenses are treated as period costs under both absorption costing and variable costing. Product costs relate to manufacturing costs assigned to inventory and cost of goods sold. Under absorption costing, product costs include direct materials, direct labor, variable manufacturing overhead, and fixed manufacturing overhead. Under variable costing, product costs include variable manufacturing costs only, while fixed manufacturing overhead is treated as a period cost. However, selling and administrative costs are not manufacturing costs, so they are expensed in the period incurred under both approaches. Internal auditors reviewing costing systems should confirm that costs are classified consistently because misclassification can affect inventory valuation, profitability analysis, and management reporting. Therefore, Option C is correct.