craik veneer original - Executive Summary The full costing...

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Executive Summary The full costing method associates fixed manufacturing costs with units of production and the amount of fixed manufacturing cost offset against revenue varies with the relationship between the number of units produced and the number sold. If production temporarily exceeds unit sales, some fixed manufacturing costs are deferred to future periods, and variance will be higher than would be reported under variable costing. If fewer units are produced during the period than are sold, fixed costs deferred in prior periods are offset against current revenue as inventory is drawn down. Thus, variance reported for the current period will be lower than would result from variable costing. Under variable costing, the level of production has no effect on variance, because all fixed manufacturing costs are offset against revenue as they are incurred, regardless of the level of production. A manufacturing company typically has departments specializing in purchasing, production, sales, shipping, accounting, finance, and personnel. Production departments and sales departments often are further subdivided along different product lines or geographical areas. Many companies produce multiple products from common raw materials and a shared production process. In such manufacturing processes, two business issues arise. One is how to allocate joint cost among the various types of products manufactured. The second incremental type of decision is whether some types of products should be
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This note was uploaded on 01/16/2012 for the course MBA 101 taught by Professor Wormer during the Spring '08 term at Indian Institute Of Management, Ahmedabad.

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craik veneer original - Executive Summary The full costing...

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