Projection - Forecasting Techniques Flashcards
under variable costing - all fixed factory overhead is treated
as a period cost and is expensed in the period incurred
under variable costing - all fixed factory overhead is treated
as a period cost and is expensed in the period incurred
when production is greater than sales
absorption costing income is greater than variable costing income.
Production in excess of sales result in increases in inventory that include capitalization of fixed costs that
are immediately expended under variable costing. since costs that are used in the determination of net income for variable costing are accounted for in inventory for absorption costing, absorption costing will produce higher net income than variable costings
Production in excess of sales result in increases in inventory that include capitalization of fixed costs that
are immediately expended under variable costing. since costs that are used in the determination of net income for variable costing are accounted for in inventory for absorption costing, absorption costing will produce higher net income than variable costings
Remember that profit + cost = sales
To obtaine
Remember that profit + cost = sales
To obtain a 15% profit , the cost of $990,000 would be 85% of sales
To maximize profit at full capacity
Contribution margin per hr should be maximized
under variable - direct costing, fixed manufacturing O/H is treated as period cost and expensed, while under
absortion costing this expense is treated as a product cost and inventoried. The two different methods will therefore result in different year - end inventory amounts. With inventory under the absorption method being higher. since the Current ratio includes inventory in current assets, the current ratio under abosortion costing will be higher.
under variable - direct costing, fixed manufacturing O/H is treated as period cost and expensed, while under
absortion costing this expense is treated as a product cost and inventoried. The two different methods will therefore result in different year - end inventory amounts. With inventory under the absorption method being higher. since the Current ratio includes inventory in current assets, the current ratio under abosortion costing will be higher.
Breakeven point in sales dollars may be computed as the ratio
of fixed costs / contribution margin ratio
an increase in production levels within the relevant range
would likely cause variable costs to increase
The difference b/t variable and absorption costing is the manner in which fixed manufacturing costs re treated.
under variable costs, only variable costs are included in inventory. Consequently , the difference in Net Income under variable costing rather than abosorption costing is the amount of fixed manufacturing costs. an increase in inventory indicates that a poriton of the fixed costs associcatedwith inventory under abosirtion costing are expeneed under varriable cost, thereofre absorption costing produced s greater income thatn variable costing as inventory levels increasse
The difference b/t variable and absorption costing is the manner in which fixed manufacturing costs re treated.
under variable costs, only variable costs are included in inventory. Consequently , the difference in Net Income under variable costing rather than abosorption costing is the amount of fixed manufacturing costs. an increase in inventory indicates that a poriton of the fixed costs associcatedwith inventory under abosirtion costing are expeneed under varriable cost, thereofre absorption costing produced s greater income thatn variable costing as inventory levels increasse
Breakeven analysis assumes that over the relevant range
unit variable costs are unchanged.
