MGMT_201_(Ganguly)_Lecture_10

MGMT_201_(Ganguly)_Lecture_10 - 171 MGMT 201 (Ganguly)...

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McGraw-Hill/Irwin 17- 17- 1 1 MGMT 201 (Ganguly) Lecture 10: Lecture 10: Intro to Intro to Absorption Costing, Absorption Costing, Variable Costing, Variable Costing, Throughput Costing Throughput Costing
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McGraw-Hill/Irwin 17- 17- 2 2 Variable Costing A system of cost accounting that only A system of cost accounting that only assigns the variable cost of production to assigns the variable cost of production to products. products. Fixed Manufacturing Costs Variable Manufacturing Costs Product
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McGraw-Hill/Irwin 17- 17- 3 3 Absorption Costing A system of cost accounting that absorbs the A system of cost accounting that absorbs the fixed cost of production to products (e.g., fixed cost of production to products (e.g., traditional predetermined OH rates and traditional predetermined OH rates and ABC pool rates). ABC pool rates). Fixed Manufacturing Costs Variable Manufacturing Costs Product
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McGraw-Hill/Irwin 17- 17- 4 4 Absorption and Variable Costing Absorption Costing Variable Costing Direct materials Direct labor Product costs Product costs Variable mfg. overhead Fixed mfg. overhead Period costs Period costs Selling & Admin. exp.
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McGraw-Hill/Irwin 17- 17- 5 5 Absorption and Variable Costing Absorption Costing Variable Costing Direct materials Direct labor Product costs Product costs Variable mfg. overhead Fixed mfg. overhead Period costs Period costs The difference between absorption and variable costing is the treatment of fixed manufacturing overhead.
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McGraw-Hill/Irwin 17- 17- 6 6 Let’s put some numbers to an example and see what we can learn about the difference between absorption and variable costing. Absorption and Variable Costing
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McGraw-Hill/Irwin 17- 17- 7 7 Mellon Co. produces a single product with Mellon Co. produces a single product with the following information available: the following information available: Number of units produced annually 25,000 Variable costs per unit: Direct materials, direct labor and variable mfg. overhead 10 $ Selling & administrative expenses 3 $ Fixed costs per year: Mfg. overhead 150,000 $ Selling & administrative expenses 100,000 $ Absorption and Variable Costing
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This note was uploaded on 03/18/2011 for the course MGMT 201 taught by Professor Rowe during the Spring '08 term at Purdue.

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MGMT_201_(Ganguly)_Lecture_10 - 171 MGMT 201 (Ganguly)...

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