Management and Organizational Studies 3370A/B Lecture 8: Chapter 8

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

Document Summary

Treats all manufacturing costs as product costs regardless of fixed or variable: consists of variable and fixed dl, dm, and moh. Variable costing ( direct or marginal costing : costing method that includes only variable manufacturing costs (dm, dl and variable moh) in the cost of a unit of product. Expenses: always treated as period costs (expenses) and deducted from revenues as incurred. Under absorption, if there is an ending inventory, fixed costs will be carried to balance sheet account (inventory) rather than period costs: deferral of costs is called fixed moh cost deferred in inventory. Effects of changes in production on operating income: Variable costing: operating income is not affected by changes in production variable costing. Absorption costing: operating income is affected by changes in production under absorption costing. Advantages of variable costing and the contribution approach: Data required for cvp analysis is taken directly from contribution income statement.