topic focus on variable and absorption costing. tf 3 what is variable costing? ► product costing...
TRANSCRIPT
TOPIC FOCUS ONVARIABLE AND ABSORPTION COSTING
TF3
WHAT IS VARIABLE COSTING?
► Product costing approach that includes only variable costs• Direct materials• Direct labor• Variable overhead
► Fixed overhead is not considered a product cost but is treated as a period cost and expensed as incurred
TF3
COMPARISON
TF3
JERSEY FABRIC PRODUCT COSTS
Absorption Costing Variable CostingDirect Materials $1.26 $1.26Direct Labor 0.54 0.54Variable Overhead 0.30 0.30Fixed Overhead 1.50 Total cost per yard $3.60 $2.10
TF3
UNITS SOLD = UNITS PRODUCED
Absorption Costing Variable Costing
TF3
UNITS SOLD < UNITS PRODUCED
Absorption Costing Variable Costing
TF3
UNITS SOLD > UNITS PRODUCED
Absorption Costing Variable Costing
TF3
EFFECTS ON OPERATING INCOME