BUS 215 Study Guide - Midterm Guide: Standard Cost Accounting, Finished Good, Earnings Before Interest And Taxes
Document Summary
1: know the differences between absorption costing and variable costing. Only manufacturing costs that vary with output are treated as product costs. Direct materials, direct labor, and the variable portion of manufacturing overhead. Period costs are selling and administrative expenses as well as fixed manufacturing overhead (expensed in its entirety each period) The cost of a unit of product in inventory or cogs does not contain any fixed. Treats all manufacturing costs as product costs. Adheres to the matching principle: be able to prepare an income statement under each format (i. e. absorption and variable) Xxx: know the strengths and weaknesses of both formats. Weakness: net operating income can be distorted by changes in inventories: be able to determine product and period cost under each format. Product: direct materials, direct labor, variable manufacturing overhead, and fixed. Period: variable selling and administrative and fixed selling and administrative. Product: direct materials, direct labor, and variable manufacturing overhead.
