CHAPTER 10

VARIABLE COSTING: A TOOL FOR

EVALUATING MANAGEMENT
PERFORMANCE
 INVENTORY COSTING AND CAPACITY ANALYSIS
 ABSORPTION COSTING
 VARIABLE COSTING
 Underlying Concept of Variable Costing
 Advantages of Using Variable Costing
 Disadvantages of Using Variable Costing
 Comparison between Variable Costing and
Absorption Costing
1. As to treatment of the various operating costs:
2. As to net operating income
3. As to amount of inventory
Reconciliation of Net Income under Variable Costing
with Net Income under Absorption Costing
Illustrative Problem 10-1: Preparation of Income Statements
under Variable Costing and Absorption Costing
Solution:
Illustrative Problem 10-2: Computation of Inventory values under
Variable Costing and Absorption Costing
Solution:
Illustrative Problem 10-3: Conversion of Income Statement from
Variable Costing method to Absorption Costing Method
Illustrative Problem 10-3: Conversion of Income Statement from
Variable Costing method to Absorption Costing Method
Solution:
Why Managers Prefer Direct Costing to Absorption Costing?
Variable Costing and Performance Evaluation of Managers
Variable Costing and Segmented Reporting
Segmented Reporting: Variable-Costing Basis
Figure 10-1: Segmented Income Statement, 2000, Variable- Costing Basis
Variable Costing for Planning and Control
Super-Variable Costing
Super-Variable Costing and Variable Costing – An Illustration
Super-Variable Costing Income Statements
Super-Variable Costing Income Statements
Variable Costing Income Statements
Variable Costing Income Statements
Reconciliation of Super-Variable Costing and Variable Costing Income