Absorption Costing vs Variable Costing

Question 1

Other Name
- for Absorption
- for Variable

Answer 1

Absorption
- full costing (COGS format)

Variable
- direct costing (CM format)

Question 2

Also explain why it is treated as such

Treatment of Fixed OH

Answer 2

Absorption
- product cost (inventoriable)

Variable
- period cost (fully expensed)

Question 3

Product Cost
- for Absorption
- for Variable

Answer 3

Absorption - DM, DL, VFOH, FFOH

Variable - DM, DL, VFOH

Question 4

Period Cost
- for Absorption
- for Variable

Answer 4

Absorption - S & A expenses (Fixed or Variable)

Variable - S & A expenses (Fixed or Variable) + FFOH

Question 5

Criticism
- for Absorption
- for Variable

Answer 5

Absorption - income manipulation

Variable - violation of matching principle

Question 6

Which produces higher profit?

P SAVE B

Answer 6

Production | Sales
Absorption | Variable
Ending Inv | Beginning Inv

Question 7

Reconciliation

VAPE

Answer 7

Variable to Absorption
- Plus FFOH in Ending inventory (deferred)
- Deduct FFOH beginning inventory (released)

vice-versa for absorption → variable

Question 8

Throughput Costing

Super Variable Costing

Answer 8

Only DM is product cost

Question 9

Volume Variance

Only applicable in absorption costing

Answer 9

• (actual - normal) x unit FFOH
• Since mas malaki actual production, favorable
• Favorable = deducted in COGS