Cost Accounting – Chapter

Cost Accounting – Chapter

Variable costing does not include all direct costs as inventories costs. Only variable direct manufacturing costs are included. Any fixed direct manufacturing costs, and any direct manufacturing costs (either variable or fixed), are excluded from inventories costs. B. Variable costing includes as inventories costs not only direct manufacturing costs but also some indirect costs (variable indirect manufacturing costs). 9-3 No. The difference between absorption costing and variable costs is due to accounting for fixed manufacturing costs.

As service or merchandising companies have no fixed manufacturing costs, these companies do not make choices between absorption costing and variable costing. 9-4 The main issue between variable costing and absorption costing is the proper timing of the release of fixed manufacturing costs as costs of the period: a. At the time of incurred, or b. At the time the finished units to which the fixed overhead relates are sold. Variable costing uses (a) and absorption costing uses (b). 9-5 No.

A company that makes a variable-cost/fixed-cost distinction is not arced to use any specific costing method. The Stance Company example in the text of Chapter 9 makes a variable-cost/fixed-cost distinction. As illustrated, it can use variable costing, absorption costing, or throughput costing.

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