Inventory Costing Systems Flashcards
Absorption Costing
product costs: DM, DL, VMO, FMO
period costs: F SG&A, V SG&A
Variable Costing
product costs: DM, DL, VMO
period costs: FMO, F SG&A, V SG&A
Throughput (Super Variable) Costing
product costs: DM
period costs: DL, FMO, VMO, F SG&A, V SG&A
Benefits of absorption costs over variable costs
-required for external financial reporting and US taxes
-follows matching rule
-inexpensive to use internally
Matching Rule
recognize expenses in the period in which they’re incurred to generate revenue
Overproduction
absorption costing leads to incentives to produce more units, so that the fixed manufacturing costs are spread over more units, reducing COGS, increasing OI
Production Volume Variance
POHR for FMO * (budgeted units of production - actual units of production)
Fixed manufactured costs are always on the income statement for what type of costing?
variable costing
