MBA642 Week 4 Assignments

MBA642 Week 4 Assignments - MBA642 Week 4 Assignments...

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MBA642 Week 4 Assignments 4.2.10 Chapter 8 Video Watch the video for chapter 8…post comments and explain why companies use variable costing? Why is the periodic net income different under the 2 methods? Feel free to post other observations. Variable costing considers the costs of manufacturing overhead as a periodic cost that is expensed only during the period when it is incurred. Absorption costing includes the fixed costs of manufacturing overhead at the time the production takes place, regardless of when the product is sold. Absorption costing can give an inaccurate snapshot of the periodic net income due to a lack of periodic cost expensing. Periodic net income is different for variable costing vs. absorption costing because of the different times that the methods incur the manufacturing overhead expenses. Both methods will show equivalent net income over a long period of time, but in the short term variable costing is more accurate for manufacturing purposes. The video shows the following relationships between sales & income under the two methods: Year Production vs. Sales Net Income Relation 1 Production = Sales Absorption = Variable 2 Production > Sales Absorption > Variable 3 Production < Sales Absorption < Variable Based on the calculations shown in the video, it seems like variable costing gives a
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MBA642 Week 4 Assignments - MBA642 Week 4 Assignments...

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