Chapter 20

cost of a product manufactured according to absorption costing?

c- double declining balance depreciation expense on factory building

cost of a product manufactured according to variable costing?

d. Direct materials

If i produced the same # of what I sell

N.I will be the same

A.C dont expands the

fixed manufacturing cost

unit price factor

for the year

Absorption used in cost manufacturing includes

- DM - DL

variable costing income statement,

- Sales - Variable COGS - M. Margin - Variable S&A - C. Margin

Absorting Costing

- all manufacturing costs are included in finished goods and remain there as an asset until the goods are sold. - DM - DL - VFO - FFO - Manufacturing Cost ( Variable & Fixed ) - S & A Exp - V per unit - Fixed

3 Manufacturing Cost

1. DM 2. DL 3. FO

Produced < Sell

Produced N.I < Sell N.I

Variable a.k.a

Direct

Produced > Sell

Produced N.I > Sell N.I

Factory Overhead can be divide to

Variable & Fixed

quantity factor

planned year

Variable costing (direct)

- the COGM iscomposed only of variable manufacturing cost that increase and decrease as the volume of production rises of falls. - DM - DL - VFO

Accountants prefer the variable costing method over absorption costing method for evaluating the performance of a company because

by using the absorption costing method, income could appear to be higher by producing more inventory.

Under variable costing, which of the following costs would be included in finished goods inventory?

c- Wages of carpenters in a furniture factory c- Variable factory overhead cost NOT Salary of factory supervisor

Under absorption costing, which of the following costs would NOT be included in finished goods inventory?

d- Advertising costs for a furniture manufacturer d- Variable and fixed selling and administrative expenses