022210 - What does this product cost Kattelus Spring 2010 1...

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Unformatted text preview: What does this product cost? Kattelus - Spring 2010 1 It depends! On what? _________________ which product costing approach you use Alternative approaches for costing a product ( Full) absorption costing (CH 3-4) Variable costing (CH 4-5-6) Other ways to cost products: Activity-based costing (CH 7) Kattelus - Spring 2010 2 CH 6 Variable Costing Concepts • Compare variable and absorption costing methods, with respect to: Unit product costs Net operating income Ending inventory Advantages and disadvantages • Managing inventory levels (just-in-time) Kattelus - Spring 2010 3 Recall: the relation between F/G Inventory and Cost of Goods Sold (COGS) Balance Sheet Assets: Cash x Accounts receivable x Finished goods inventory x Capital assets x Total Assets x Total Liabilities x Total Equity x Income Statement Sales x Less: Beginning F/G Inventory + Cost of Goods Manufactured Cost of Goods Available for Sale- Ending F/G Inventory COGS x Gross Margin x Less: Selling & Admin Exp x Kattelus - Spring 2010 4 Overview of Absorption and Variable Costing Kattelus - Spring 2010 5 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 How is Fixed Mfg O/H treated differently between Variable and Absorption Costing? Balance Sheet Income Statement Absorption Costing Inventory includes fixed manufacturing overhead; “inventoriable” product costs Cost of Goods Sold includes fixed mfg overhead Variable costing No fixed manufacturing overhead in inventory Expense all fixed manufacturing overhead Kattelus - Spring 2010 6 On variable vs. absorption costing 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 and fixed selling and administrative costs should be included as product costs....
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022210 - What does this product cost Kattelus Spring 2010 1...

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