Chapter 9 - Summary Cost Accounting PDF

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Summary

Professor Prakash Mulchandani...

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04/03/2016 

Variable costing- all variable manufacturing costs (direct and indirect) are included as inventoriable costs  All fixed manufacturing costs are excluded from inventoriable costs and are treated as period cost  

Variable nonmanufacturing is treated as a period cost Direct costing

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Absorption costing- all variable manufacturing costs and all fixed manufacturing costs are included as inventoriable costs  Inventory “absorbs” all manufacturing costs  There is a production volume variance o Choice of denominator   

Required for financial reporting

Comparing Variable and Absorption costing  The main difference between variable costs and absorption costing is the accounting for fixed manufacturing costs o Variable- expensed to the period o Absorption- inventoriable  If inventory increases during an accounting period, less operating income will be reported under variable costing than absorption costing 

If inventory decreases, more operating income will be reported under variable costing than absorption costing

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When production equals sales = equal operating income

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When Production > sales = variable lower, absorption higher When production < sales = variable higher, absorption lower

04/03/2016 

04/03/2016 ...