Costing System and variance

Question 1

Absorption (full) costing

Answer 1

Includes all variable + fixed manufacturing costs in product cost

Question 2

Marginal (variable) costing

Answer 2

Inventory valued at variable manufacturing cost; fixed manufacturing cost expensed in period

Question 3

Overhead Absorption Rate (OAR)

Answer 3

Budgeted overhead ÷ Budgeted activity base (e.g. machine‑hours)

Question 4

Standard cost

Answer 4

Pre‑set unit cost used as a benchmark; variance = Actual – Standard

Question 5

Price variance

Answer 5

(Actual – Standard price) × Actual quantity

Question 6

Usage / Efficiency variance

Answer 6

(Actual – Standard quantity) × Standard price