Job order costing 2: Absorption and variable costing

Question 1

What do we have to do when we overapply

Answer 1

reduce the cost of goods sold in the income statement
and vise versa

Question 2

absorption costing

Answer 2

= full costing, all products are measured, including unsold stock
= product costs

Question 3

variable costing

Answer 3

only variable costs, not fixed
= period costs

Question 4

INCOME STATEMENT

Answer 4

sales
- cost of goods sold:
beginning stock
+ cost of goods manufactured
ending stock
Gross margin: (sales - (beginning stock + cost of goods manufactured)
- variable selling and admin expenses
- fixed selling and admin expenses
NET PROFIT= gross margin - (variable + fixed)

Question 5

JIT stock methods

Answer 5

production tends to be equal to sales as it means theres no inventroy so difference between variable and absorption profit tends to disappear