Accounting Chapter 19

Absorption costing (also called full costing)

A costing method that includes all manufacturing costs-direct materials, direct labor, and both variable and fixed overhead- in unit product costs. Absorption costing is also referred to as the full costing; also called full costing.

Contribution margin report

A performance report that lists sales less variable costing, ending with the contribution margin; fixed costs are extended.

Contribution format

An income statement format that is geared to cost behavior in that costs are separated into variable and fixed categories rather than being separated according to the functions of production, sales, and administration.

Uncontrollable costs

Costs that a manager does not have the power to determine or strongly influence.

Controllable costs

Costs that a manager has the power to control or at least strongly influence.

Contribution margin income statement

Income statement that separates variable and fixed costs; highlights the contribution margin, which is sales less variable expenses.

Variable costing (also called direct or marginal costing)

The costing method that includes only variable manufacturing costs- direct materials, direct labor, and variable manufacturing overhead- in unit product costs; also called direct or marginal costing.

Fixed overhead cost deferred in inventory

The portion of the fixed manufacturing overhead cost of a period that goes into the inventory under the absorption costing method as a result of the production exceeding sales.

Fixed overhead cost recognized from inventory

The portion of the fixed manufacturing overhead cost of a priod period that becomes an expense of the current period under the absorption costing method as a result of the sales exceeding production.