Shared Flashcard Set

Details

ACC 804 - Cost Accounting Chap 8
Cost Accounting
10
Accounting
Graduate
11/08/2015

Additional Accounting Flashcards

 


 

Cards

Term
Using the variable costing method, which of the following costs are assigned to inventory?
Definition
Variable costing assigns only variable manufacturing costs to inventory. Variable manufacturing costs include direct materials, direct labor, and variable factory overhead. Fixed factory overhead is treated as a period expense. Variable selling and administrative costs, although deducted to arrive at a contribution margin, are not included as inventoriable costs, but are expensed in full each period.
Term
The absorption costing method includes in work in process and finished goods inventories:
Definition
Absorption costing includes both fixed and variable manufacturing costs in product costs, and factory overhead costs are included in work in process and finished goods inventories.
Term
In an income statement prepared as an internal report using the direct (variable) costing method, fixed selling and administrative expenses would
Definition
Be used in the computation of operating income, but not in the computation of the contribution margin.
Term
In an income statement prepared as an internal report using the direct (variable) costing method, fixed selling and administrative expenses would
Definition
Be used in the computation of operating income, but not in the computation of the contribution margin.

- Variable Manufacturing
- Variable Selling and Administrative
= Contribution Margin
- Fixed Manufacturing
- Fixed Selling and Administration
= Operating Income
Term
Which of the following statements is correct regarding the difference between the absorption costing and variable costing methods?
Definition
When production is greater than sales, absorption costing income is greater than variable costing income. This is why managers are often tempted to overproduce.
Term
How does absorption costing (AC) v. direct costing (DC) effect inventory valuation?
Definition
Inventory using AC will always be greater than inventory using DC because AC includes fixed product overhead costs.
Term
How is absorption costing (AC) fundamentally different from direct costing (DC)?
Definition
The difference between AC and DC can be fundamentally isolated to the treatment of fixed manufacturing overhead. For AC it is a product cost and with DC it is a period cost.
Term
What types of product costs are included in the direct costing model?
Definition
Only variable manufacturing costs are included in product costs.
Term
How is the contribution margin calculated using the direct costing method?
Definition
Contribution margin is equal to revenue minus all variable costs, including period costs.
Term
Which costing method is required for compliance reporting (i.e., financial and tax reporting)?
Definition
Absorption costing.
Supporting users have an ad free experience!