Ch 19 Accounting Test 3

contribution format

-a income statement that separately reports variable and fixed cost element -it highlights the impact of each cost element of income

Controllable costs

cost that manager has the power to determine or markedly affect the amount incurred

Uncontrollable costs

costs not within the manager's control or influence

Variable costing

-also called direct/marginal costing -costing approach where only costs that change in total with changes in production level are included in product costs -these consist of direct materials, direct labor, and var. manufacturing overhead -expenses are grouped according to cost behavior--var or fixed and production or nonproduction

manufacturing margin

-also called production margin -sales less variable production costs

fixed overhead

this cost does not change with changes in production level so it is excluded from the cost in variable costing methods -excluded from product costs under variable costing -instead it is treated as a separate

Contribution margin

this is the excess of sales over variable costs - this contributes to covering all fixed costs and earning income

Fixed overhead cost recognized from inventory

to restate variable costing income to absorption costing income we must deduct

Fixed overhead cost deferred in inventory

to restate variable costing income to absorption costing income, we must add back the

Absorption costing

-also called full costing -is a traditional approach to costing which assumes that products absorb all costs incurred to produce them -this approach is used for external financial reporting(GAAP) -BUT it can result in misleading product cost information for managers and business decisions.

contribution margin income statement

the income statement under variable costing