Absorption VS Variable Costing Flashcards
Costs that are necessary and are an integral part of producing the finished product.
Product Costs
Do not become expenses until the company sells the finished goods inventory.
Product Costs
Costs that are matched with the revenue of a specific time period rather than included as part of the cost of salable product.
Period Costs
Companies deduct them from revenues in the period in which they are incurred.
Period Costs
Costing method that includes all manufacturing costs in the cost of a unit of product.
Absorption Costing
Treats fixed manufacturing overhead as a product cost.
Absorption Costing
Also called Full Costing and Conventional Costing.
Absorption Costing
Costing method that includes only variable manufacturing costs in the cost of a unit of product.
Variable Costing
Treats fixed manufacturing overhead as a period cost.
Variable Costing
Also called Direct Costing.
Variable Costing
P > S
A > V
P < S
A < V
Reconciliation of Income under Absorption Costing and Variable Costing
(Change in Inventory x Unit Fixed Factory OH) + Variable Costing Net Income
