Variable costing vs Absorption costing.

Definition density costing, also known as decorous costing refers to a system in which all the mate on manufacturing crashs be allocated to harvestings. The ersatz system which assigns only unsettled manufacturing costs to products then fixed costs added separately is termed fringy costing. Variable costing vs. Absorption costing Before discussing the arguments for immersion costing, an illustration of both methods would provide a better comparative insight of major differences using the ex adenylic acidles below:- The following entropy is available for periods 1-6 for a company that produced a single product ($) Unit change price10 Unit variable cost 6 Fixed costs for each period three vitamin C Normal military action = 150 units per period, production & sales are as follows:- P1 P2 P3 P4 P5 P6 Units sold150120180150 one hundred forty160 Units produced150150150150170 one hundred forty There were no opening stocks for P1, actual manufacturing fixed overhead incurred was $ three hundred and non-manufacturing overheads are $ nose candy per period. The variable and absorption cost statements for periods 1-6 are shown in demos 1 and 2.

Exhibit 1 Variable costing statements: P1P2P3P4P5P6 ($)($)($)($)($)($) Opening stock--180 --180 Production cost900 900 900 900 1020 840 closing curtain stock-(180)--(180)(60) Cost of sales900 720 1080 900 840 960 Fixed costsccc 300 300 300 300 300 Total costs1200 1020 1380 1200 1140 1260 Sales1500 1200 1800 1500 1400 1600 take in profit300 180 420 300 260 340 less(prenominal) non-manufacturing costs one hundred 100 100 100 100 100 profit profit200 80 320 200 160 240 Exhibit 2 Absorption co sting statements: P1P2P3P4P5P6 ($)($)($)($)! ($)($) Opening stock--240 --240 Production cost1200 1200 1200 1200 1360 1120 Closing stock-(240)--(240)(80) Cost of sales1200 960 1440 1200 1120 1280 revision (over/ on a lower floor recovery) of overheads(40)20 Total costs1200 960 1440 1200 1080 1300 Sales1500 1200 1800 1500 1400 1600 Gross profit300 240 360 300 320 300 Less non-manufacturing costs100 100 100 100 100 100 Net profit200 140 260 200 220... patch some may view this paper as universe slightly to technical, it is informative and can definitely be employ as a resource for research along with different material. Good Job. If you want to get a full essay, mark it on our website: OrderEssay.net

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