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  • Chapter 5 - Variable Costing - A Tool For Management

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    joseph planas
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    This document discusses variable costing and absorption costing. It explains how variable costing differs from absorption costing in computing unit product costs and preparing income statements. While variable costing and absorption costing yield different net operating incomes, the document explains how to reconcile the two amounts. The advantages and disadvantages of both variable and absorption costing are explored. Key insights around unit cost computations, income comparisons, decision making, external reporting, and the impact of lean production are summarized.

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    Chapter 5 - Variable Costing - A Tool for Management

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    Chapter 5 - Variable Costing - A Tool for Management

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    This document discusses variable costing and absorption costing. It explains how variable costing differs from absorption costing in computing unit product costs and preparing income statements. While variable costing and absorption costing yield different net operating incomes, the document explains how to reconcile the two amounts. The advantages and disadvantages of both variable and absorption costing are explored. Key insights around unit cost computations, income comparisons, decision making, external reporting, and the impact of lean production are summarized.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    2 views10 pages

    Chapter 5 - Variable Costing - A Tool For Management

    Uploaded by

    joseph planas
    This document discusses variable costing and absorption costing. It explains how variable costing differs from absorption costing in computing unit product costs and preparing income statements. While variable costing and absorption costing yield different net operating incomes, the document explains how to reconcile the two amounts. The advantages and disadvantages of both variable and absorption costing are explored. Key insights around unit cost computations, income comparisons, decision making, external reporting, and the impact of lean production are summarized.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 10

    CHAPTER 5 VARIABLE COSTING: A TOOL FOR MANAGEMENT

    Learning Objectives
     Explain how variable costing differs from absorption costing and compute unit
    product costs under each method.
     Prepare income statements using both variable and absorption costing.
     Reconcile variable costing and absorption costing net operating incomes and
    explain why the two amounts differ.
     Understand the advantages and disadvantages of both variable and absorption
    costing.

    Overview of Absorption and Variable Costing

    Page 1
    Unit Cost Computations

    Income Comparison of Absorption and Variable Costing

    Page 2
    Page 3
    Page 4
    Page 5
    Unit Cost Computations

    Page 6
    Summary of Key Insights

    Page 7
    CVP Analysis, Decision Making and Absorption costing
    Absorption costing does not dovetail with CVP analysis, nor does it support decision
    making. It treats fixed manufacturing overhead as a variable cost. It assigns per unit
    fixed manufacturing overhead costs to production.

    Page 8
    External Reporting and Income Taxes

    Advantages of Variable Costing and the Contribution Approach

    Impact of Lean Production

    Page 9
    Reference
    Lecture Notes of Compilation of Dean Rene Boy R. Bacay, CPA, CrFA, CMC, MBA, FRIAcc

    For further discussion please refer to the link provided:

    Chapter 5-Overview of Absorption and Variable Costing-https://youtu.be/WEsFr79xh2s

    Chapter 5- Formula of Absorption and Variable Costing https://youtu.be/iihGkCEjyqo

    Chapter 5-Lean Production (Overview)-https://youtu.be/PEZGGsi_dDE

    Page 10

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