Job Order Costing 2 : Absorption and Variable Costing Flashcards
How to compute the unit product costs under variable costing
Add up direct materials, direct labour and variable mfg. overhead only
How to compute the unit product costs under absorption costing
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
What is absorption costing
‘full costing’, all production costs are absorbed into products
Unsold stock is measured at the total cost of production
What is variable costing
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
What are ‘cost of goods sold’
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
What are ‘selling and admin expenses’
Variable selling and admin and fixed selling and admin
take away this from gross margin to get net profit
Income statement layout based on absorption costing
Sales (sold x selling price)
Minus cost of goods sold
Gross margin
Less selling and administrative expenses
Net profit
Income statement layout based on variable costing
Sales
Minus variable expenses
minus variable selling administrative costs
Contribution margin
Less fixed costs
Net profit
What are variable expenses
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
What are fixed expenses (variable costing)
Manufacturing overhead, selling and admin expenses
How to calculate profits using absorption costing
