Managerial Accounting

by James Jiambalvo
Chapter 5:
Variable Costing

Slides Prepared by:

Scott Peterson
Northern State
University
Objectives
1. Explain the difference between full
(absorption) and variable costing.
2. Prepare an income statement using variable
costing.
3. Discuss the effect of production on full and
variable costing income.
4. Explain the impact of JIT (just-in-time) on the
difference between full and variable costing
income.
5. Discuss the benefits of variable costing for
internal reporting purposes
Full (Absorption) Costing
1. Full (Absorption) Costing includes:
a. Direct material
b. Direct labor
c. Manufacturing overhead (both
variable and fixed)
2. Decision making and “what-if”
decisions are difficult because of the
commingling of fixed and variable
overhead.
3. Required for GAAP.
Variable Costing
1. Variable Costing includes:
a. Direct material
b. Direct labor
c. Variable Manufacturing overhead
2. Variable Costing lends itself well to
decision making and “what-if”
analyses.
3. Not allowed for GAAP.
Perbedaan full costing dan
Variable costing
 Full costing : semua biaya terserap dan
dihitung dalam unit yang
diproduksi/persediaan, yang terdiri dari
biaya material, tenaga kerja dan FOH.
 Variable costing : hanya biaya variable
yang dihitung dalam persediaan. Biaya fix
diperhitungkan dalam biaya periodik dan
dicatat dalam laporan keuangan (L/R).
Differences Between Full
(Absorption) and Variable
Costing
1. Fixed manufacturing overhead
(included in Full Costing).
2. Fixed manufacturing costs, like
depreciation, are a period
expense on the income statement
under variable costing.
3. Fixed manufacturing costs, like
depreciation, are inventoried until
sold under full costing.
Variable Costing Income
Statement
1. The format uses a contribution margin
approach.
2. All costs, manufacturing, selling and
administrative, are classified as either
fixed or variable.
 Perbedaan laporan keuangan full
dan variable costing
Full Costing Variable costing

Sales 100.000 Sales 100.000

HPP -30.000 Variable costing :
Gross margin 70.000 Variable HPP -20.000
biaya adm dan penjualan -30.000 Variable biaya adm -15.000
dan penjulan
Net Income 40.000 Kontribusi margin 65.000
Fix Cost -25.000
Net Income 40.000
Variable Costing Income
Statement Example
Sales $100,000
Less Variable:
Variable COGS $20,000
Variable Selling 10,000
Variable Admin. 5,000 35,000
Contribution Margin 65,000
Less Fixed:
Fixed Mfg. 10,000
Fixed Selling 8,000
Fixed Admin 7,000 25,000
Net Income 40,000
Full (Absorption) Costing
Income Statement Example
Sales
$100,000
Less COGS 30,000
Gross Margin 70,000
Less Selling and Admin:
Selling 18,000
Admin 12,000
30,000
Net Income
40,000
Dampak pendapatan
Perusahaan perakitan motor menjual
motor seharga $ 2000/unit. Biaya var :
direct material $600, Direct tenaga kerja
$225, FOH : $75, biaya penjulan
$40/unit. Biaya Fix : FOH=$1.200.000,
biaya penjulan $100.000, adm : $500.000
Effects of Production on
Income for Full Versus Variable
Costing: Clausen Tube
Facts:
 5,000 units produced and sold
 Selling Price: $2,000 per unit
 Variable Manufacturing:
 Direct Materials: $600 per unit
 Direct Labor: $225 per unit
 Variable MFG: $75 per unit
 Fixed Manufacturing: $1,200,000 per year
 Selling Expense: $40 per unit variable plus
$100,000 fixed.
 Administrative: $500,000 per year (fixed)
Clausen Tube Income
Statement: Full Costing
Sales $10,000,000
Less COGS 5,700,000
Gross Margin 4,300,000
Less Selling and Admin:
Selling $300,000
Admin 500,000 800,000
Net Income $3,500,000
Income statement
 Harga jual $2.000
 Biaya variable :
 Direct material 600.
 Direct labor 225
 Varable over head 75 - 900
 Var selling ekspens/unit - 40
 Kontribusi margin/unit 1.060
Fix manufacturing overhead - 1.200.000
Fix biaya penjualan - 100.000
Fix biaya Adm - 500.000
Clausen Tube Income
Statement: Variable Costing
Sales $10,000,000
Less Variable:
Variable COGS $4,500,000
Variable Selling
and Admin 200,000
Contribution Margin 5,300,000
Less Fixed:
Fixed Mfg. 1,200,000
Fixed Selling 100,000
Fixed Admin 500,000 1,800,000
Net Income $3,500,000
 Biaya Biaya tidak
langsung langsung

Variable Variable Fix Cost

Fix Cost
cost cost

Variabel Biaya
Full
csoting Produksi
costing
Unit cost
 jumlah unit yang dijual

Full Costing = prod (ribuan) Variable costing

5000 unit
Sales 10.000 Sales 10.000
HPP( 900+ 5.700 Variable cost :
( 1200000/5000 ) x Var HPP= 900 x 5000 4.500
5000 Var biaya 200
penjualan=40x5000
Gross margin 4.300 Contribusi margin 5.300
Biaya penjualan : -300 Fix cost :
100.000 + (40x500) Fix biaya produksi 1.200
Fix biaya penjualan 100
Biaya ADM cost 500
Biaya ADM -500 Net Income 3.500
Net Income 3.500
Unit cost = Total biaya 5700 : Contribusi margin rasio= 0,53
jumlah 5000= 5.300 : 10.000
Unit Produksi =unit Penjualan
 Net income sama antara full costing
dengan variable costing, karena tidak
ada fix cost yang tertahan di
persediaan.
Kesalahan asumsi berdasarkan
full costing income stt
 menghitung dampak dari hasil program marketing ?
 1. Diasumsikan bahwa biaya yang dihitung pada
COGS adalah hanya biaya variabel, yang
menyebabkan profit /unit terlalu kecil.
gross margin : sales =4.300.000:10.000.000= 0,43
 Asumsi bahwa biaya variabel equivalen dengan
costribusi margin.
Net Income : sales= 3.500.000: 10.000.000 = 0,35
Pertanyaan tugas
1. Apa makna kontribusi margin sebesar
0,53% ?
2. Pada kasus yang sama, penjualan
dinaikan sebesar $ 200.000. Berapa
peningkatan profit ?
 Contribusi margin menunjukan kemampuan
penjualan setiap unit barang menutupi biaya
tetap sebesar 53%.
 Penjualan dinaikan $200.000

Peningkatan penjualan = $ 200.000

Contribusi margin ratio 0,53
Kontribusi margin meningkat = 106.000
-peningkatan biaya penjualan = 100.000
Peningkatan profit = 6.000
 jumlah unit yang dijual

Full Costing = prod (ribuan) Variable costing

5000 unit
Sales 4.800 x 2000 9.600 Sales 9.600
HPP( 900+ 5,472 Variable cost :
( 1200000/5000 ) x Var HPP= 900 x 4.800 4.320
4800 Var bi penjualan=40x4.800 192
Gross margin 4.128 Contribusi margin 5.088
Biaya penjualan : -292 Fix cost :
100.000 + (40x4800) Fix biaya produksi 1.200
Fix biaya penjualan 100
Biaya ADM cost 500
Biaya ADM -500 Net Income 3.288
Net Income 3.336
Unit cost = Total biaya 5.472 : Contribusi margin rasio= ....
jumlah 5000=1,09 5.088 : 9600
produksi
 Mengapa net income pada full costing
lebih besar dari variable cost pada saat
produksi lebih besar dari unit yang dijual?
 Karena pada full costing sebagian biaya tetap
tersimpan didalam persediaan, sedangkan
pada variable costing tidak ada biaya yang
tersimpan dalam persediaan, semua biaya fix
dibebankan pada biaya periode.
Variable Costing Income
Statement: Considerations
1. When sales volume and production
volume are exactly equal, net income
is the same under either full or variable
costing.
2. Contribution margin is easily calculated
under variable costing: 2,000 – 940 =
1,060.
3. Contribution margin ratio is: 1,060 /
2,000 = 53%
Clausen Tube: Production is
Greater Than Sales
Facts:
 6,000 units produced and 4,800 units sold
 Selling Price: $2,000 per unit
 Variable Manufacturing:
 Direct Materials: $600 per unit
 Direct Labor: $225 per unit
 Variable MFG: $75 per unit
 Fixed Manufacturing: $1,200,000 per year
 Selling Expense: $40 per unit variable plus
$100,000 fixed.
 Administrative: $500,000 per year (fixed)
Clausen Tube Income
Statement: Full Costing--
Production > Sales
Sales $ 9,600,000
Less COGS 5,280,000
Gross Margin 4,320,000
Less Selling and Admin:
Selling $292,200
Admin 500,000 792,200
Net Income $3,528,000
Clausen Tube Income
Statement: Variable Costing--
Production > Sales
Sales $ 9,600,000
Less Variable:
Variable COGS $4,320,000
Variable Selling
and Admin 192,000
Contribution Margin 5,088,000
Less Fixed:
Fixed Mfg. 1,200,000
Fixed Selling 100,000
Fixed Admin 500,000 1,800,000
Net Income $3,288,000
Variable Costing Income
Statement: Considerations--
Production > Sales
1. Net income is higher under full costing
than variable costing.
2. $3,528,000 vs. $3,288,000 = $240,000
3. The $240,000 difference is due to the
1,200 (6,000 – 4,800) additional units
produced and unsold.
4. Fixed manufacturing $1,200,000 /
6,000 units x 1,200 units remaining =
$240,000
Jumlah yang diproduksi lebih
besar dari unit yang dijual
 Dalam kasus yang sama, jumlah yang
diproduksi 5.000 unit sedangkan unit yang
dijual sebesar 4.800 unit.
Pertanyaan :
 Apa pengaruh terhadap net income, terhadap

laporan full costing dan variable costing ?

 Berapa nilai persediaan menurun full costing

dan variable costing ?

Produksi lebih kecil dari unit yang
dijual
 Full costing :
 Perusahaan memiliki persediaan awal.
 Nilai persediaan lebih besar pada variable
costing karena unsur biaya persediaan
termasuk biaya tetap.
 Net income lebih kecil pada variable cost,
karena HPPnya lebih besar.
Summary of Effects of
Production on Net Income
 If units produced = units sold, then no
difference between full costing and
variable costing net income.
 If units produced > units sold, then full
costing net income is greater than
variable costing net income.
 If units produced < units sold, then full
costing net income is less than variable
costing net income.
Impact of JIT on the Income
Effects of Full Versus Variable
Costing
1. JIT (Just-In-Time) inventory systems
lead to low inventories.
2. Results in little difference between
production and sales.
3. Variable versus absorption net income
differences negligible.
Benefits of Variable Costing for
Internal Reporting
1. Variable costing facilitates C-V-P
analysis because it uses a
“contribution” approach.
2. Variable costing mitigates the effects of
earnings management because fixed
manufacturing costs are not
inventoried. Thus, merely increasing
production volume relative to sales will
not boost net income.
 Quick Review Question #1
1. Which of the following lends itself well
to C-V-P Analysis?
a. Full Costing
b. Absorption Costing
c. Variable Costing
d. Average Costing
 Quick Review Answer #1
1. Which of the following lends itself well
to C-V-P Analysis?
a. Full Costing
b. Absorption Costing
c. Variable Costing
d. Average Costing
 Quick Review Question #2
2. Units produced = 2,000, units sold =
1,800, contribution margin ratio is 37%,
fixed S & A expenses are $90,000.
Fixed mfg. Expenses are $80,200 By
how much is net income greater under
full costing than variable costing?
a. $8,020
b. $80,200
c. $9,000
d. $17,020
 Quick Review Answer #2
2. Units produced = 2,000, units sold =
1,800, contribution margin ratio is 37%,
fixed S & A expenses are $90,000.
Fixed mfg. Expenses are $80,200 By
how much is net income greater under
full costing than variable costing?
a. $8,020
b. $80,200
c. $9,000
d. $17,020
 Quick Review Question #3
3. Which of the following complies with
GAAP for external reporting purposes?
a. Absolute costing
b. Variable costing
c. Fixed costing
d. Absorption costing
 Quick Review Answer #3
3. Which of the following complies with
GAAP for external reporting purposes?
a. Absolute costing
b. Variable costing
c. Fixed costing
d. Absorption costing
 Quick Review Question #4
4. Which of the following lends itself well
to internal decision making?
a. Full costing
b. Variable costing
c. Absorption costing
d. None of these
 Quick Review Answer #4
4. Which of the following lends itself well
to internal decision making?
a. Full costing
b. Variable costing
c. Absorption costing
d. None of these
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