Management Accounting 1 Lesson 6 Absorption and Variable Costing and Budgeting.doc

Management Accounting 1 Lesson 6 Absorption and Variable Costing and Budgeting
Management Accounting 1
Lesson 6
Absorption and Variable Costing and Budgeting
LEARNING OBJECTIVES
13>. Explain how variable costing differs from absorption costing pute unit product costs under each method.
2. Prepare e statements using both variable and absorption costing.
3. Reconcile variable costing and absorption operating es, and explain why the two amounts differ.
4. Understand the advantages and disadvantages of both variable and absorption costing.
5. Explain how the use of JIT reduces the difference in operating e under the variable and absorption costing methods.
After studying this chapter, you should be able to:
Part 1 - Absorption and
Variable Costing
1. Variable and Absorption costing
Variable costing(变动成本法) and Absorption costing (完全成本法) are alternative methods of determining unit product costs. They affect:
Inventory valuations.
Net e.
Overview of Absorption and Variable Costing
The only cost of driving my car on a 200 kilometre trip today is $12 for gasoline.
Variable Costing
Overview of Absorption and Variable Costing
No! You must consider these costs too!
Absorption Costing
Overview of Absorption and Variable Costing
You’re wrong. I have the car payment and the insurance payment even if I do not make the trip.
Variable Costing
Overview of Absorption and Variable Costing
Who’s right?
How should we treat the car payment and the insurance?
Overview of Absorption and Variable Costing
Key elements
Absorption costing
Absorption costing is generally considered to be required for external financial reports and for tax reporting.
Note: In Canada either method is acceptable for both tax and external reporting provided that it is used on a consistent basis.
Variable costing
- Variable costing is an attractive alternative for internal management reports.
Let’s put some numbers to the issue and see if it sharpens our understanding.
2.