ABSORPTION AND VARIABLE COSTING Learning Objectives 1. Explain the accounting treatment of fixed manufacturing overhead under absorption and variable costing. 2. Prepare an income statement under absorption costing. 3. Prepare an income statement under variable costing. 4. Reconcile reported income under absorption and variable costing. 5. Explain the implications of absorption and variable costing for cost-volume-profit analysis. 6. Evaluate absorption and variable costing.
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1) When will profits reported under variable and absorption costing differ? How can we reconcile the profits reported under the two approaches? Profits reported under variable and absorption costing will differ when inventory increases or decreases during the year. The difference involves the timing with which fixed manufacturing overhead becomes an expense. Under variable costing‚ fixed overhead is expensed immediately as it is incurred. Under absorption costing‚ fixed overhead is inventoried
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Classify each cost listed below as either a product cost or a period cost for purposes of preparing the financial statements for the bank. 1. The cost of the memory chips used in radar set. * Product Cost 2. Factory Heating Cost * Period Cost 3. Factory Equipment maintenance costs. * Period Cost 4. Training costs for new administrative employees * Period Costs 5. The cost of the solder that is used in assembling the radar sets. * Product costs 6. The Travel
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Differences in Cardiovascular Fitness that Effect Nonsmokers and Smokers Kayla Forbes 2-15-12 Bio Lab 140/77 Hilde Stawski Abstract: The goal of this experiment was to find out how smoking affected nonsmokers‚ light smokers‚ and heavy smokers heart rate during cardiovascular endurance. The participants will record their pulse rate before and after every minute for six minutes after the step test. As predicted‚ the heavy smokers had an increase in pulse rate that was twice as high as the
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Variable costing and absorption costing are the two most commonly used methods of inventory costing for manufacturing companies. The inventory method of variable costing takes place when total direct and indirect variable manufacturing costs are included within inventoriable costs. Fixed manufacturing costs however‚ are considered costs of the period under variable costing. The next method of inventory costing‚ absorption costing‚ includes all variable manufacturing costs as well as fixed manufacturing
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to Snap Scenario 1: Fire Max If Lynne decides to fire Max the company might face the following problems: 1. The company might face a huge lawsuit especially since there is no physical evidence related to any violent behavior from his side or that he represents a real threat. 2. The company will lose a hard working employee whose previous job performance shows that he’s one of the best and hard working programmers in the company. 3. This action might actually lead Max to Snap! It
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units during the period. The manufacturing costs and selling and administrative expenses were as follows: Total cost Rs. Beginning inventory: Direct materials Direct labour Variable factory overhead Fixed factory overhead Total Current period costs: Direct materials Direct labour Variable factory overhead Fixed factory overhead Total Selling and administrative expenses: Variable Fixed Total Instructions: 1. 2. 3. Prepare an income statement based on the variable costing concept. Prepare an income statement
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Absorption and Variable Costing‚ Inventory Management Absorption and Variable costing are very important tools for cost accounting. Both of these costing methods allow you to see the cost of your inventory‚ in a different way. For example the absorption method allows you to assign all costs to the product‚ while variable costing allows only variable costs to be assigned to the product. Inventory management is extremely important as well because it ties into efficiency and lowering your costs so that
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pushing the enemy in combat operations and frontlines or pushing pens and papers as regard to the administrative duties of the organization. Either way‚ military personnel should maintain high level of physical fitness at all times whether in the garrison or in the field. Physical fitness‚ as defined by Lt. Colonel Teodosio‚ is the possession of an individual of a healthy body‚ a capacity for skillful and sustained performance‚ an ability to recover from exertion rapidly‚ a desire to complete a designated
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Plant overhead $122‚000 D/L rate/hour $30 Youngstown has a traditional cost system. It calculates a plant-wide overhead rate by dividing total overhead costs by total direct labor hours. Assume‚ for the calculations below‚ that plant overhead is a committed (fixed) cost during the year‚ but that direct labor is a variable cost. 1. Calculate the plant-wide overhead rate. Use this rate to assign overhead costs to products and calculate the profitability of the four products. The assignment
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