ACCT 102 Chapter 19 Variable vs Absorption Costing

ACCT 102 Chapter 19 Variable vs Absorption Costing - ACCT...

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ACCT 102 – Fundamentals of Acct II Chapter 19 – Variable Costing and Performance Reporting Schmidt Purpose: The purpose of this handout is to help you distinguish between traditional “GAAP Costing,” also known as absorption costing, and direct or variable costing which is the focus of this chapter. You already know half of this chapter, but you just may not be familiar with the terminology. The traditional GAAP costing financial statements that we have been learning for awhile use a method called “absorption costing,” or full costing, which means that product costs are fully absorbed and consist of direct materials, direct materials, and factory overhead. While this method is required for external reporting, and mandated by GAAP, it is sometimes not useful for internal reporting. It actually could cause us to make an incorrect managerial decision. In this chapter we will learn about an alternative method called variable costing. Traditional GAAP Costing – Why Use It?
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ACCT 102 Chapter 19 Variable vs Absorption Costing - ACCT...

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