Management and Organizational Studies 3370A/B Chapter Notes - Chapter 8: Total Absorption Costing, Income Statement, Financial Statement

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

Document Summary

Chapter 8 variable costing: a tool for management. Instead, it is treated as a period cost and expensed entirely against revenue each period: direct costing and marginal costing is another name for variable costing. Selling and administrative expenses: these expenses are rarely treated as product costs, regardless of the costing method in use, under either the absorption or variable costing, expenses are always treated as period costs and deducted from revenues. Unit cost computations: under the absorption costing method, all manufacturing costs, variable and fixed, are included when determining the unit product cost, under the variable costing method, only the variable manufacturing costs are included in product costs. Income comparison of absorption and variable costing: under the absorption method, if there is an ending inventory, the fixed manufacturing costs associated with the inventory will be carried forward as a balance sheet account, If inventories decrease, fixed manufacturing overhead costs are released from inventories and operating income decreases.