AFM102 Chapter Notes - Chapter 8: Cash Flow, Total Absorption Costing, Earnings Before Interest And Taxes
Document Summary
Chapter 8: variable costing: a tool for management. Variable costing (direct costing or marginal costing): a costing method that includes only variable manufacturing costs - dm, dl, and variable moh - in the cost of a unit of product. Fixed manufacturing overhead cost deferred in inventory: the portion of the fixed manufacturing overhead cost of a period that goes into inventory under the absorption costing method as a result of production exceeding sales. Treats all manufacturing costs as product costs, regardless of whether they are variable or fixed. Fixed moh is a period cost, like selling and administrative expenses. Income comparison of absorption and variable costing: under absorption costing, if there is ending inventory then fixed moh will be carried forward as a balance sheet account (fixed manufacturing overhead cost deferred in inventory) Effect of changes in production on operating income. Oi (operating income) is not affected by changes in production under variable costing.