BUS 254 Lecture Notes - Total Absorption Costing, Net Income, Income Statement

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 254

Document Summary

It assigned all variable and fixed manufacturing costs to the product. Variable costing: assigns only variable manufacturing costs to the product, dm, dl, and variable mo, selling and admin expenses are still period costs though, the fixed mo is an expensive in the current period. Comparison: when there"s more units produced than sold = absorption costing shows a higher. Income: when there"s less units produced than sold = variable costing shows a higher income, when an equal amount of units is produced and sold = they are both the same. For the income statement: variable costing, follows the cvp format (shows the contribution margin, which is sales variable cogs and variable selling and admin expenses, for the cogs, only variable cogs is included, not the fixed. Example is better to show, so look at slides/textbook! Gaap requires companies to use absorption costing for external reporting.