Variable_Costing_Day_2_Personal

Variable_Costing_Day_2_Personal - Variable Costing- Day 2...

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Variable Costing- Day 2
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Concept Review What is the difference between variable costing and absorption costing?
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Concept Review How do differences in sales and production effect the income of a company under the variable and absorption costing method? Relation between Effect Relation between production on variable and and sales iniventory absorption income Inventory Absorption Production > Sales increases > Variable Inventory Absorption Production < Sales decreases < Variable Absorption Production = Sales No change = Variable
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Problem 7-10 
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Reconciliations between Absorption and  Variable Costing Look at the difference between production and sales. If Production is greater than Sales deduct fixed overhead from Absorption Net Income. If Production is less than Sales add fixed overhead to Absorption Net Income.
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Absorption Costing Problems and Limits to Variable Costing Problems CVP Analysis- Problems with Absorption Break Even units from CVP can create a profit Decision Making- Absorption causes mispricing One Advantage External Reporting- Tax rules require absorption costing. Why? External reporting rules are ambiguous.
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Concept Review If fixed manufacturing costs are released from inventory under absorption costing, what does this tell you about the level of production in relation to the level of sales? If fixed manufacturing overhead cost is released from 
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Variable_Costing_Day_2_Personal - Variable Costing- Day 2...

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