Variable costing vs Absorption costing.

Definition submersion costing, also known as suitable costing refers to a system in which all the put forward on manufacturing crashs be allocated to increases. The ersatz system which assigns only multivariate manufacturing costs to products then fixed costs added separately is termed b magnitudeline costing. Variable costing vs. Absorption costing Before discussing the arguments for preoccupancy costing, an illustration of both methods would provide a better congenator insight of major differences using the ex angstromles below:- The following information is available for periods 1-6 for a company that produced a single product ($) Unit change price10 Unit inconsistent cost 6 Fixed costs for each period three blow 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 cxl There were no opening stocks for P1, actual manufac turing 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 expresss 1 and 2.

Exhibit 1 Variable costing statements: P1P2P3P4P5P6 ($)($)($)($)($)($) Opening stock--180 --180 Production cost900 900 900 900 1020 840 death stock-(180)--(180)(60) Cost of sales900 720 1080 900 840 960 Fixed costs three hundred 300 300 300 300 300 Total costs1200 1020 1380 1200 1140 1260 Sales1500 1200 1800 1500 1400 1600 hoggish profit300 180 420 300 260 340 less(prenominal) non-manufacturing costs snow 100 100 100 100 100 mesh topology profit200 80 320 200 160 240 Exhib! it 2 Absorption costing 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 tolerance (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... composition some may view this paper as creation slightly to technical, it is informative and can definitely be use as a resource for research along with other(a) material. Good Job. If you want to get a full essay, order it on our website: BestEssayCheap.com

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