Management and Organizational Studies 3370A/B Lecture Notes - Lecture 6: Finished Good, Xunit, Canada Revenue Agency

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 3370A/B
• Professor: Laura Timusk

Document Summary

Lecture 6 overview of absorption and variable costing. Main concept of ch10 not tested on this exam. 1 question from each of applicable chapters, calculations and short answer. Difference between absorption and variable costing is how fixed moh is treated: absorption treats as product, variable treats as period cost. Will need to know how to build an income statement in either way and what differences are. Under absorption costing, selling and administrative expenses are always treated as period expenses and deducted from revenue as incurred. We can reconcile the difference by adding the fixed manufacturing oh costs deferred in inventory (units x fmoh per unit) to income. Add: fixed mfg. overhead costs deferred in inventory (5,000 units per unit) Or we deduct fmoh deferred when variable costing income is higher due to deferred moh being released. Effect of changes in production on operating income. Variable costing income is only affected by changes in unit sales.