Chapter 6 Lecture Notes
Adjustable Costing and Segment Credit reporting: Tools to get Management
ONLY ONE THING
-- the only thing that is different is the price classification of FMOH
| |Absorption costing (full cost) | | |Variable costing | | | Sales |Product cost (COGS) | Sales |Product price | |- COGS |DM |-Variable Expenditures |DM | |Gross Income |DL |Contribution Margin |DL | | |VMOH | |VMOH | |- Operating expenses |FMOH (product cost) |-Fixed expenses |period cost-- VS& A | |Net income | |Net cash flow | | | |Period costs (op. exp. ) | |Period costs (fixed) | | |VS& A | |FMOH | | |FS& A | |FS& A
Why two different strategies?
UNIT MERCHANDISE COST COMPUTATIONS (Per Device Product " InventoryвЂќ Costs)
|Absorption charging Product Cost |Variable costing Product Price | |DM |DM | |DL |DL | |VMOH |VMOH | |FMOH (Total FMOH/units Produced) |
FMOH on a per unit basis
Absorption priced at puts FMOH on a per device basis. To determine FMOH per unit all of us divide Total Fixed Manufacturing Overhead by the number of products PRODUCED.
Providing and administrative costs ---are PERIOD COSTS for both equally Methods Set Selling and administrative costs
Variable Offering and management costs (Cost per product sold by number of units sold)
|Absorption costing Period Cost |Variable costing Period Cost | |Variable Offering & Management (VS& A per device x unit sold) |Variable Selling & Administrative (VS& A per unit x unit sold) | |Fixed Selling & Administrative price |Fixed Offering & Administrative cost | | |Fixed manufacturing over head cost
Calculation of Gross Profit versus Contribution Margin
Product sales вЂ“ cost of good sold = Major Profit
Product sales вЂ“ changing expenses sama dengan Contribution perimeter
|Absorption charging (Gross Profit) |Variable charging (Contribution Margin) | |Sales (units distributed x selling price per unit) minus |Sales (units distributed x value per unit) minus...