Job Order Costing 2 : Absorption and Variable Costing Flashcards

1
Q

How to compute the unit product costs under variable costing

A

Add up direct materials, direct labour and variable mfg. overhead only

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1
Q

How to compute the unit product costs under absorption costing

A

1) Add up direct materials , direct labour and variable ,mfg. overhead

2) divide manufacturing overhead by number of units to get fixed mfg oH

3) add two together

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2
Q

What is absorption costing

A

‘full costing’, all production costs are absorbed into products

Unsold stock is measured at the total cost of production

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3
Q

What is variable costing

A

Marginal costing, only variable costs of production are allocated to products

Unsold stock is measured at variable cost of production and fixed costs are treated as a cost of the period in which they are incurred

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4
Q

What are ‘cost of goods sold’

A

Beginning stock, cost of goods made (units x unit cost) to get goods available for sale, ending stock

minus these then sales - ans to get gross margin

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5
Q

What are ‘selling and admin expenses’

A

Variable selling and admin and fixed selling and admin

take away this from gross margin to get net profit

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6
Q

Income statement layout based on absorption costing

A

Sales (sold x selling price)
Minus cost of goods sold
Gross margin
Less selling and administrative expenses
Net profit

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7
Q

Income statement layout based on variable costing

A

Sales
Minus variable expenses
minus variable selling administrative costs
Contribution margin
Less fixed costs
Net profit

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8
Q

What are variable expenses

A

Beginning stock, cost of goods made to get goods available for sale, ending stock, minus that to get variable cost of goods sold, variable selling and admin expenses

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9
Q

What are fixed expenses (variable costing)

A

Manufacturing overhead, selling and admin expenses

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10
Q

How to calculate profits using absorption costing

A
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