Managerial Accounting-chapter 19
Cost elements that are included when computing unit cost under variable costing?
1. Direct materials 2. Direct labor 3. Variable overhead
Cost elements that are included when computing unit cost under Absorption Costing:
1. Direct materials 2. Direct labor 3. Variable overhead 4. Fixed overhead
Contribution Margin Report
A performance report that excludes fixed expenses and net income.
Controllable Costs
An effective cost control practice that holds managers responsible for costs that they have the power to determine or at least markedly affect the amount incurred.
Full Costing
Another name for Absorption Costing, which assumes that products absorb all costs incurred to produce them.
Direct or Marginal Costing
Another name for Variable Costing
Uncontrollable Costs
Costs that are not within the manager's control or influence.
What are the limitations of absorption costing?
External reporting and for income tax reporting but not used for internal purposes.
What are the limitations of variable costing?
Internal reporting and business decisions but not used for external reporting and tax reporting,
Variable Costing
Only costs that change in total with changes in production level are included in product costs, excluded are fixed costs.
Contribution margin equation
Sales - Variable Expenses
Gross margin equation
Sales-Cost of Sales
Absorption Costing
Under the traditional costing approach, all manufacturing costs are assigned to products. Those costs consist of direct materials, direct labor, variable overhead and fixed overhead.
Contribution Margin Income Statement
Variable Costing Income Statement which excludes fixed expenses and net income.
Units produced are less than units sold is when
Variable costing income exceeds absorption costing income.
Units produced exceed units sold is when
Variable costing income is less than absorption costing income.
Contribution Format
When we separately report variable and fixed cost elements as an income statement in the _______________ format, it highlights the impact of each cost element for income.