Chapter 6: Variable Costing andSegment Reporting

Vairable COsting
1. Contribution format
  1. When sales go up net operating income goes up
2. Internal decision making
3. Variable expenses reported seperate from fixed expenses
4. Variable costing: only costs that vary with output are product costs
Absorbtion Costing
1. External Reporting
2. All manufacturing costs are product costs
3. Net income is not driven by sales inventory changes affect data
4. Fixed manufacturing overhead can appear variable but it is not
5. Required for GAAP and IFRS reporting
Segment: part or activity of an organization that mangers like cost, revenue or profit data on
Selling and Administrative costs never treated as product costs
Cost volume profit analysis
1. break costs down into variable and fixed costs
Traceable : incurred because a segment exsists
Common fixed costs: support multiple segments
Segment margin: segment contribution margin -traceable fixed costs

Resource summary

	Created by Kelli Kramer about 3 years ago