ACCT 2101 Chapter : Book Notes Accounting Test 1 Chapters 1,2,5
Document Summary
Although the mechanics of the varioius costing methods differ, all have the same basic objective:to calculate the full manufacturing cost of each unit produced. The costing systems described in the previous chapters were all examples of full absorption costing, a costing method that assigns all manufacturing costs to the product as it is being produced. For internal purposes, managers often need information that is based on cost behavior: we call the costing system that provides this type of information variable costing. Instead of classifying costs as either manufacturing (product) or nonmanufacturing (period) costs, we now classify costs based on how they behave in response to a change in some measure of activity. Cost behavior described the way total cost behaves, or changes, when some measure of activity changes. All of these will increase, in total, as starbucks sells more coffee drinks: although total variable costs change with activity, variable cost per unit remains constant.
