Chapter 9 Book Flashcards
fixed manufacturing costs are excluded from inventoriable costs
variable costing/direct costing
fixed manufacturing costs are included in inventoriable costs
absorption costing
includes all variable manufacturing costs (both direct and indirect) in inventoriable costs
variable costing
are excluded from inventoriable costs and treated as period costs
(variable costing)
fixed manufacturing costs
are treated as period costs and expensed
(variable costing)
variable nonmanufacturing costs
direct costing is another term for variable costing, but it is imprecise because it includes _________ as inventoriable and treats _________, like marketing, as period costs
- variable manufacturing overhead (an indirect cost)
- fixed direct costs
includes all manufacturing costs, both variable and fixed, as inventoriable costs
absorption costing
inventory under absorption costing absorbs all
manufacturing costs
whats an example of absorption costing
job costing system
under both variable and absorption costing all variable manufacturing costs are inventoriable costs
inventoriable costs
under both variable and absorption costing all nonmanfucturing costs in the value chain (reasearch, and development, marking), whether variable or fixed, are ?
period costs and recorded as expenses when incurred
the key difference between variable and absorption costing is
the treatment of fixed manufacturing costs
under _____ costing, operating income is affected by both the unit level of production and the unit level of sales
absorption
under _______ costing, operating income is affected only by the unit level of sales
variable
_______ format is used in absorption costing
gross margin format
________ format is used in variable costing
contribution margin format
over how long of a period, the difference in operating income between variable and absorption costing in influenced by the level of production and sales within that year
1 year period
over how long of a period, the difference in operating income between the two costing methods can be more pronounced due to the accumulation of inventory and the timing of production and sales
2 year period
comparing income statements for one year (variable or absorption)
- uses the contribution margin format
- distinguishes between variable and fixed costs
- fixed manufacturing costs are expensed in the period incurred
variable costing
comparing income statements for one year (variable or absorption)
- uses the gross margin format
- distinguishes between manufacturing and nonmanufacturing costs
- fixed manufacturing costs are treated as inventoriable costs
absorption
income statements differences
- under ______ costing, the entire fixed manufacturing cost is expensed in 2020
variable
income statements differences
- under ______ costing, fixed manufacturing costs are allocated to units produced
absorption
operating income would be higher under (variable or absorption) costing
absorption
- bc only a certain amount of fixed manufacturing costs are expensed, compared to all the fixed costs under variable costing
_______ costs are accounting for the same way in both methods
variable manufacturing costs
_____ costing treats fixed manufacturing costs as period expenses
variable costing
_______ costing includes manufacturing costs in the cost of goods manufactured
absorption costing
under ______ costing, a production volume variance occurs when actual production deviates from the budgeted level
absorption
_____ costing income statemetns include a line item for production volume variance, which affects the reported operating income
absorption
_____ costing treats all fixed manufacturing costs as period expenses, leading to different operating income figures
variable
if inventory increases, _______ costing reports higher income
absorption
if inventory decreases, _____ costing reports higher income
variable
under _____ costing, fixed manufacturing costs in ending inventory are deferred to future periods
absorption
cost of goods sold equation
cost of goods sold =
beginning inventory + cost of goods manufactured = COGS + ending inventory
reducing inventory levels ______ the differences in operating income between absorption and variable costing
minimizes
contribution margin per unit equation
contribution margin per unit =
selling price - variable manufacturing cost per unit - variable marketing cost per unit
change in variable costing operating income equation
change in variable costing operating income =
contribution margin per unit * change in quantity of units sold
under ______ costing, managers cannot increase operating income by producing for inventory because only the quantity of units sold affects operating income
variable
under ______ costing, managers increase operating income both the unit level of sales and the unit level of production
absorption
