Flashcards
Accounting Chapter 8
Flashcards do conjunto (13)
- 1Two methods of computing income ABSORPTION COSTING VARIABLE COSTINGx
- 2ABSORPTION COSTING: assigns all manufacturing costs to product { DM, DL, Variable OH and Fixed OH } Fixed OH is assigned to product and is not expensed until product is sold (Inventoriable Cost)x
- 3VARIABLE COSTING: assigns only variable manufacturing costs to the product; these include DM, DL, Variable OH Fixed OH is treated as a PERIOD expense; therefore excluded from product cost. Charged against revenues.x
- 4PRODUCT COSTS FOR ABSORPTION DM, DL, Var. OH, Fixed OH PERIOD COSTS SGA expensesx
- 5PRODUCT COSTS FOR VARIABLE COSTING: DM, DL, Var. OH PERIOD COSTS: Fixed OH, SGA expensesx
- 6GENERALLY ACCEPTED PRINCIPLES (GAAP) requires absorption costing for EXTERNAL reporting. Financial Accounting Standards Board (FASB), the IRS, and other regulatory bodies DON'T accept var. costing as product-costing method.x
- 7INVENTORY VALUATION: Inventory is valued at product or manufacturing cost. Under ABSORPTION, prod cost includes DM, DL, FIXED and VAR OH Under VARIABLE costing, prod cost includes only DM, DL, and VAR. OH.x
- 8CALCULATING END INV. (Absorption): Units ending inv = Units beg inv + Units produced - Units Sold CALCULATE VALUE OF ENDING INV.: Units ending inv. * Absorption unit prod cost (calculated by adding DM, DL, BOTH OH)x
- 9CALCULATING END INV. (Variable Method): Units end = units begin + units prod. - units sold CALC VALUE OF END INV. Units end * Var unit prod cost --> (find by adding DM, DL ,VAR OH)x
- 10Only difference between both approaches is the treatment of fixed OH. As a result, unit prod cost under ABSORPTION is > unit prod cost under VARIABLEx
- 11COGS (ABSORPTION) COGS = Absorption unit prod cost * units sold INCOME STATEMENT Sales - COGS = Gross Margin - SGA = Operating Incomex
- 12COGS (Variable Costing): COGS = Var. unit prod cost * Units Sold INCOME STATEMENT Sales - Var. Expenses (Var. COGS) = Contribution Margin - Fixed Expenses (Fixed OH) (Fixed SGA) = Operating Incomex
- 13DIRECT Relationships 1. If Production > Sales then Absorption Income > Var. Income 2. Prod. < Sales then Absorp Income < Var Income 3. Prod = Sales then Absorp Income = Variable Incomex
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- FlashCards sobre Accounting Chapter 8, criado por Liyah em 16-04-2015.
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