chapter 18 & 19

Absorption costing

costing system which treats all costs of production as product costs, regardless weather they are variable or fixed. The cost of a unit of product under absorption costing method consists of direct materials, direct labor and both variable and fixed overhead.

contribution format

income statement is an income statement in which all variable expenses are deducted from sales to arrive at a contribution margin, from which all fixed expenses are then subtracted to arrive at the net profit or loss for the period. Thus, the arrangement of expenses in the income statement corresponds to the nature of the expenses

contribution margin report

is a cost accounting concept that allows a company to determine the profitability of individual products. The phrase "contribution margin" can also refer to a per unit measure of a product's gross operating margin calculated simply as the product's price minus its total variable costs.

Variable costing

is a managerial accounting cost concept. Under this method, manufacturing overhead is incurred in the period that a product is produced. This addresses the issue of absorption costing that allows income to rise as production rises.

contribution margin income statement

is an income statement in which all variable expenses are deducted from sales to arrive at a contribution margin, from which all fixed expenses are then subtracted to arrive at the net profit or loss for the period.

what units produced exceed units sold for a reporting period, would income under variable costing be greater than, equal to or less than income under absorption costing?

when units exceed units sold for reporting period

What costs are normally included as part of product costs under the method of absorption costing?

Absorption costing includes direct materials directly were very well overhead and fixed overhead as part of product costs. I'll cost of product or absorbency to product cost.

Where is the key difference between absorption costing and variable costing?

Absorption costing umbrella costing are different on the basis of fixed manufacturing overhead under absorption costing fixed manufacturing is considered as product cost and assets to the products are sold under their variable costing it is considered as. Cost and expense and income statement

fixed overhead cost recognized from inventory

Fixed overhead is a set of costs that do not vary as a result of changes in activity. These costs are needed in order to operate a business.

controllable costs

These are variable costs such as raw materials, labour, and other overheads deemed controllable by management. A certain portion of fixed costs can also be considered controllable.

fixed overhead cost deferred in inventory

When inventories increase, some of the current periods fixed manufacturing overhead costs are deferred in inventory. b. The amount of fixed manufacturing overhead cost deferred is equal to the increase in units in inventory multiplied by the fixed manufacturing overhead cost per unit.

uncontrollable costs

are business expenses that the manager doesn't have direct power over. In other words, the business manager doesn't have control over how these costs are incurred.

what costs are normally included as part of product costs under the method of variable costing?

direct materials, direct labor, and variable overheads as product costs. Fixed overhead is treated as a period costs.