COMM 112 Chapter Notes - Chapter 8: Income Statement, Financial Statement, Matching Principle
Document Summary
Chapter 8: variable costing a tool for management. Variable costing: a costing method that includes only variable manufacturing costs direct materials, direct labour, and variable manufacturing overhead in the cost of a unit of product. Direct costing: another name for variable costing. Marginal costing: another name for variable costing. Fixed manufacturing overhead cost deferred in inventory: the portion of the fixed manufacturing overhead cost of a period that goes into inventory under the absorption costing method as a result of production exceeding sales. Summary: variable and absorption costing are alternative methods of determining unit product costs, under variable costing, only those production costs that vary with output are treated as product costs. This includes direct materials; variable overhead; and, ordinarily, direct labour. When some foods remain unsold at the end of the period, some of the fixed manufacturing overhead cost is held in inventor and deferred to the period in which the related units of product are sold.
