Variable Costing for Managment analysis

Variable Costing for Managment analysis

1. Absorption costing

   • Is one of the accounting principles
     • The variable are, direct materials, direct labor, and factory overhead costs
       • Variable costing
         • Direct materials, direct labor and overhead costs

2. Variable costing and effects of inventory

   • Units manufactured equal units sold: when the number of units manufactured equals the number of units sold, so the income from operation will be the same
   • Units manufactured exeed units sold: In this case the costing income from operation will be less than it is for absorption costing
   • Units manufactured less than the units sold: In here the variable of costing income form operation will be grather than the absorption costing

3. Using absorption and variable costing

   • Controlling costs
     • Not all costs are conrtollable, like, plant supervition control, use of direct matirials in their department.
     • For the level of managment there are two types of costs, the controllable like the salaries of production supervisors, and the not controllable
   • Pricing Products
     • There exist the short run and long run of pricing
       • For the short run means that this can not be avoided, teh price of the prouct should be at least be equal to the variable of costs including marketing
       • In the long run, mean that the company must set its sells to cover all the costs and expenses
   • Planning production
     • Is the planning of the production of the company, in most of the cases, operating decisions must be made quickly before the opportunities are gone