MGT223H5 Chapter Notes - Chapter 8: Total Absorption Costing, Fixed Cost, Income Statement
Document Summary
When production = sales net income = same for both absorption and variable costing. If production > sales absorption costing will have the higher net income. If production < sales variable costing will have higher net income. Variable costing: does not include fixed manufacturing overhead. Which of the following costs/ expenses is included in product costs under both absorption and variable costing: supervisory salaries, equip dep, variable selling exp, variable manufacturing costs. Absorption costing: used for external financial reports: treats all manufacturing costs as product costs regardless of variable / fixed, unit cost = dm, dl, both variable + fixed manufacturing overhead. Variable costing: preferred by some managers for internal decision making and must be used when an income statement is prepared in contribution format aka marginal / direct costing. = dm, dl: unit cost overhead variable manufacturing. Chapter 8: variable costing overhead in portion of overhead that goes under costing result of exceeding.
