Chapter+8+Review

Chapter+8+Review - Chapter 8 Absorption and Variable...

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Chapter 8 – Absorption and Variable Costing and Inventory Management Product and period cost classified under absorption and variable costing. Costing Method Absorption Variable Direct materials Product Product Direct labor Product Product Variable overhead Product Product Fixed overhead Product PERIOD Selling expenses Period Period Administrative expenses Period Period Absorption Costing Income Statement - Assigns all manufacturing costs to the product. Direct Materials; Direct Labor; Variable Overhead; Fixed Overhead Fixed overhead is applied to the product using a predetermined overhead rate Variable Costing Income Statement - Assigns only variable manufacturing costs to the product. Used for internal reports and decision making Direct Materials; Direct Labor; Variable Overhead Fixed overhead is treated as a period expense Compute Inventory Cost under Absorption and Variable Costing Units in ending inventory (EI) = Units in beginning inventory + Units produced – Units sold Absorption Costing Value of ending inventory = Units in EI x Product Cost (DM + DL + OH) Variable Costing Value of ending inventory = Units in EI x Variable Product Cost (DM + DL + VOH) Absorption-Costing Income Statement - GAAP
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This note was uploaded on 10/13/2011 for the course ACCT 2361 taught by Professor Severance during the Spring '08 term at Texas State.

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Chapter+8+Review - Chapter 8 Absorption and Variable...

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