04 - Cost Determination (stock costing) Methods

Question 1

total/full method

Answer 1

all industrial costs are allocated (F+V) - COGS in p&l

products not sold (and their costs) remain in final stock

Question 2

variable method

Answer 2

only variable industrial costs are allocated in COGS

FC are considered as period costs

value of final stock only contains variable cost

Question 3

main difference b/w full and variable method

Answer 3

FULL - industrial costs are only considered when products are sold

VARIABLE - FC are considered when incurred (period costs)

Question 4

rational method

Answer 4

considers differences b/w real and normal activity

ind. cost = variable ind cost + allocated fixed cost

Question 5

suppose Qp > Qs, why is the EBTv < EBTf?

Answer 5

because the full industrial costs are considered in the P&L whereas the full system only considers the costs of the units sold

full - both F+V costs of final stock remain in warehouse
var - only V costs of final stock remain in warehouse