W8-class material-chp07 - VARIABLE COSTING: A TOOL FOR...

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CHAPTER SEVEN VARIABLE COSTING: A TOOL FOR MANAGEMENT
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Learning Objective 1 Explain how variable Explain how variable costing differs from costing differs from absorption costing and absorption costing and compute unit product compute unit product costs under each method. costs under each method.
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Overview of Absorption and Variable Costing Direct Materials Direct Labor Variable Manufacturing Overhead Fixed Manufacturing Overhead Variable Selling and Administrative Expenses Fixed Selling and Administrative Expenses Variable Costing Absorption Costing Product Costs Period Costs Product Costs Period Costs
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Prestudy-1 1.The principal difference between variable costing and absorption costing centers on: A) whether variable manufacturing costs should be included as product costs. B) whether fixed manufacturing costs should be included as product costs. C) whether fixed manufacturing costs and fixed selling and administrative costs should be included as product costs. D) none of these.
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Quick Check Which method will produce the highest values for work in process and finished goods inventories? a. Absorption costing. b. Variable costing. c. They produce the same values for these inventories. d. It depends. . . Which method will produce the highest values for work in process and finished goods inventories? a. Absorption costing. b. Variable costing. c. They produce the same values for these inventories. d. It depends. . .
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Which method will produce the highest values for work in process and finished goods inventories? a. Absorption costing. b. Variable costing. c. They produce the same values for these inventories. d. It depends. . . Which method will produce the highest values for work in process and finished goods inventories? a. Absorption costing. b. Variable costing. c. They produce the same values for these inventories. d. It depends. . . Quick Check
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Prestudy-2 2. Which of the following costs at a manufacturing company would be treated as a product cost under the variable costing method? A) direct material cost B) property taxes on the factory building C) sales manager's salary D) all of the above
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Harvey Company produces a single product with the following information available: Number of units produced annually 25,000 Variable costs per unit: Direct materials, direct labor, and variable mfg. overhead 10 $ 3 $ Fixed costs per year: Manufacturing overhead 150,000 $ 100,000 $ Number of units produced annually 25,000 Variable costs per unit: Direct materials, direct labor, and variable mfg. overhead 10 $ 3 $ Fixed costs per year: Manufacturing overhead 150,000 $ 100,000 $ Unit Cost Computations
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Unit product cost is determined as follows: Under absorption costing , selling and administrative expenses are always treated as period expenses and deducted from revenue as incurred. Absorption
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This note was uploaded on 04/18/2011 for the course FINANCE 1001 taught by Professor Lochengshu during the Spring '11 term at National Cheng Kung University.

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W8-class material-chp07 - VARIABLE COSTING: A TOOL FOR...

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