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Chapter 6:

* Variable Costing:

Product Cost--Direct Materials; Direct Labor; Variable Manufacturing Overhead

Period Cost--Fixed Manufacturing Overhead; Variable Selling and Administrative Expenses; Fixed Selling and Administrative Expenses

Absorption Costing:

Product Cost--Direct Materials; Direct Labor; Variable Manufacturing Overhead; Fixed Manufacturing Overhead

Period Cost--Variable Selling and Administrative Expenses; Fixed Selling and Administrative Expenses

* Comparing two methods

Relation between production and sales Effect on inventory Relation between variable and absorption income

Units produced=units sold No changes Absorption=Variable

Units produced>units sold Inventory increases Absorption>Variable

Units produced<units sold Inventory decreases Absorption<Variable

* Variable costing income is only affected by changes in unit sales. It is not affected by the number of units produced.

Absorption costing income is influenced by changes in unit sales and units of production.

* Segment Margin=contribution margin- traceable fixed costs

* Traceable fixed costs arise because of the existence of a particular segment and would disappear over time of the segment itself disappeared

Common fixed costs arise because of the overall operation of the company and would not disappear of any particular segment were eliminated

Chapter 11:

* Cost, profit, and investment centers are all known as responsibility centers.

* ROI= Net operating income/ Average operating assets

Margin = Net operating income / sales...