BUS 215 Chapter Notes - Chapter 6: Landing Fee, Income Statement, Total Absorption Costing
Document Summary
Whereas absorption costing is is used for external reporting. Variable costing is relies on the contribution format and is used for internal reporting. Managers need to measure profitability of individual segments, or arts/activities of an organization which managers would like cost, revenue, or profit data, of their organizations. Lo 1: explain how variable costing differs from absorption costing and compute unit product costs under each method. 1 both is formats include product and period costs, although they define these. 2 variable costing iss are grounded in the contribution format. 3 variable and absorption costing noi differ. Under variable costing(direct/marginal costing), only those manufacturing costs that vary with output are treated as product costs. Fixed mo as well as sg&a counted as expenses. Unit product cost does not include fixed mo. Absorption costing(full cost method) treats all manufacturing costs of product costs (includes fixed) Sg&a are never treated as product cost under either method.
