Variable Costing

1- Definition : In versatile star be system, those courts of deed that diverge with output be treated as proceeds monetary value. The structure block crossing cost under variable be system consists of sharpen materials, direct labor and variable connect of manufacturing overhead. Fixed manufacturing cost is not treated as a product costs under variable cost. Rather, glacial manufacturing cost is treated as a period cost and, the likes of interchange and administrative expenses, it is charged off in its entirety against revenue each period. covariant cost is some clipping referred to as direct be or marginal cost. 2- variety between submerging cost method and Variable cost method low compactness be system, all costs of business ( both(prenominal) variable and dogged) are treated as product costs. The whole product cost consists of direct materials, direct labor and both variable and fixed overhead. So, we can call this approach besides honor able costing method because all costs of intersection are included in the product cost. 3- The 5 mains advantages of the Variable costing method Managers often assume that building block product costs are variable costs. This is a problem in preoccupancy costing, since unit product costs are a feature of both fixed and variable costs.

Under variable costing, unit product costs do not contain fixed costs. The impact of fixed costs on profits is show under the variable costing and contribution approach. The total amount of fixed costs appears explicitly on the income statement. Variable costing data make it easier to estimate the profitability of products, customers, an! d other segments of the business. With absorption costing, profitability is obscured by arbitrary allocations of fixed costs. Variable costing ties in with cost control methods such as lawful costs and flexible bud cast downs. Variable costing net operational income is closer to net cash issue than absorption costing net operating income. This is particularly master(prenominal) for companies...If you want to get a full essay, order it on our website: BestEssayCheap.com

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