COMM 305 Study Guide - Final Guide: Total Absorption Costing, Contribution Margin, Communist Party Of Estonia
4 Dec 2018
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Variable costing is the approach used for external reporting under generally accepted accounting principles. The difference between absorption costing and variable costing is the treatment of fixed manufacturing overhead. Selling and administrative costs are period costs under both absorption and variable costing. Manufacturing cost per unit will be higher under variable costing than under absorption costing. Some fixed manufacturing costs of the current period are deferred to future periods through ending inventory under variable costing. When units sold exceed units produced, income under absorption costing is higher than income under variable costing. Gaap requires that absorption costing be used for the costing of inventory for external reporting purposes. Net income under gaap highlights differences between variable and fixed costs. Throughput costing is also called super absorption costing. A customer wants to purchase a large quantity of your product at a price below your normal selling price.
