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10_01_14 Class Notes.docx - Professor Richard Carroll...

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Professor Richard Carroll10/1/14Class NotesAbsorption Costing: What is learned in GAAP for external reporting. Fixed manufacturing overheadis a Period Cost.Variable Costing: Cannot use for external use. It’s strictly for internal management purposes. Variable expenses include variable COGS, and variable operating expenses. The sales revenue minus variable COGS and variable operating expenses is the Contribution Margin. If inventorychanges within a given period, the total variable cost will be different from the traditional way ofdisplaying COGS.Differences: The differences between variable costing and absorption costing is the treatment of Fixed MOH
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