PPT chapter 8

Question 1

descirbe full or absorption costing

Answer 1

assigns all vairable and fixed manufacutring costs to the product

Question 2

describe Variable csoting

Answer 2

assigns only variable csots to the product

DM, DL, VMOH

Question 3

which cosinting method is required under GAAP

Answer 3

Full or absorption costing - external reporting

Question 4

how are fixed manufacutring costs treated under variable costing?

Answer 4

as period costs

Question 5

what is the main difference between absorption costing and vairable costing?

Answer 5

in variable costing, fixed MOH is treated as an express in the current period

Question 6

net income under absorption csoting compared to Net incoem under variable costing

Answer 6

absortpion costing net income is higher when more untis are produced than sold

• less when they sell more than they make
• equal when the amout made is the same as amount sold

Question 7

what is the rule concerning GAAP

Answer 7

companies must use absorption costing for financial statements

• does not differentiate between viarabiale and fixed costs
• used for external pruposes

Question 8

what is a good reason for using variable csoting method

Answer 8

• shows a contribution margin, shows variable and fixed costs seperately
• easier for CVP analysis
• better for business decsions

Question 9

what are the advantages of variable csoting

Answer 9

1. consistenet with CVP and incremental analysis
2. net incoem is unaffected by changes in production levels
3. Net income is closely tied to changes in sales level - not production levels
4. easier to identify fixed and variable costs and their affects on the company

Question 10

what is the normal costing method

Answer 10

assigns overhead costs by using and estiamted overhead rate and actual quantity of allocation base

• uses an estimate rather than an actual, denominator level for the overhead cost allocation base
• if an actual denominator is used then information is not timely

Question 11

describe throughput costing

Answer 11

also called super-variable csoting

• all manufacturing costs except DM are treated as period csots
• used for internal purposes only

Question 12

When would you use Throughput costing

Answer 12

• when most manufacutring costs are not variable in the short run

Question 13

which method is based on lean manufacutring

Answer 13

throughput (sales - cogs (DM only) = GP