Briefly explain the difference between absorption costing and variable costing.

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Answer 1

Textbook Question

Chapter 8, Problem 1RQ

Briefly explain the difference between absorption costing and variable costing.

Expert Solution & Answer

To determine

State the difference between absorption costing and variable costing.

Explanation of Solution

Absorption Costing: “Absorption costing is a method that allocates “direct labor, direct materials, fixed manufacturing overhead and variable manufacturing overhead” to products and it is required by GAAP for the purpose of external reporting”.

Variable Costing: Managers frequently use variable costing for internal purposes for taking decision making. The cost of goods manufactured includes direct materials, direct labor, and variable factory overhead. Fixed factory overhead treated as period (fixed) expense.

State the difference between absorption costing and variable costing as follows:

Under absorption costing, the products costs are the cost that are assigned to the units of product as fixed manufacturing-overhead costs.
Under variable costing, the products costs are not assigned to the units of product as fixed manufacturing-overhead costs, instead it is treated as a period costs and expensed during the period in which it is incurred.

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Answer 2

Textbook Question

Chapter 8, Problem 1RQ

Briefly explain the difference between absorption costing and variable costing.

Expert Solution & Answer

To determine

State the difference between absorption costing and variable costing.

Explanation of Solution

Absorption Costing: “Absorption costing is a method that allocates “direct labor, direct materials, fixed manufacturing overhead and variable manufacturing overhead” to products and it is required by GAAP for the purpose of external reporting”.

Variable Costing: Managers frequently use variable costing for internal purposes for taking decision making. The cost of goods manufactured includes direct materials, direct labor, and variable factory overhead. Fixed factory overhead treated as period (fixed) expense.

State the difference between absorption costing and variable costing as follows:

Under absorption costing, the products costs are the cost that are assigned to the units of product as fixed manufacturing-overhead costs.
Under variable costing, the products costs are not assigned to the units of product as fixed manufacturing-overhead costs, instead it is treated as a period costs and expensed during the period in which it is incurred.

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Answer 3

Textbook Question

Chapter 8, Problem 1RQ

Briefly explain the difference between absorption costing and variable costing.

Expert Solution & Answer

To determine

State the difference between absorption costing and variable costing.

Explanation of Solution

Absorption Costing: “Absorption costing is a method that allocates “direct labor, direct materials, fixed manufacturing overhead and variable manufacturing overhead” to products and it is required by GAAP for the purpose of external reporting”.

Variable Costing: Managers frequently use variable costing for internal purposes for taking decision making. The cost of goods manufactured includes direct materials, direct labor, and variable factory overhead. Fixed factory overhead treated as period (fixed) expense.

State the difference between absorption costing and variable costing as follows:

Under absorption costing, the products costs are the cost that are assigned to the units of product as fixed manufacturing-overhead costs.
Under variable costing, the products costs are not assigned to the units of product as fixed manufacturing-overhead costs, instead it is treated as a period costs and expensed during the period in which it is incurred.

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Answer 4

Textbook Question

Chapter 8, Problem 1RQ

Briefly explain the difference between absorption costing and variable costing.

Expert Solution & Answer

To determine

State the difference between absorption costing and variable costing.

Explanation of Solution

Absorption Costing: “Absorption costing is a method that allocates “direct labor, direct materials, fixed manufacturing overhead and variable manufacturing overhead” to products and it is required by GAAP for the purpose of external reporting”.

Variable Costing: Managers frequently use variable costing for internal purposes for taking decision making. The cost of goods manufactured includes direct materials, direct labor, and variable factory overhead. Fixed factory overhead treated as period (fixed) expense.

State the difference between absorption costing and variable costing as follows:

Under absorption costing, the products costs are the cost that are assigned to the units of product as fixed manufacturing-overhead costs.
Under variable costing, the products costs are not assigned to the units of product as fixed manufacturing-overhead costs, instead it is treated as a period costs and expensed during the period in which it is incurred.

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Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

Expert Solution & Answer

To determine

State the difference between absorption costing and variable costing.

Explanation of Solution

Absorption Costing: “Absorption costing is a method that allocates “direct labor, direct materials, fixed manufacturing overhead and variable manufacturing overhead” to products and it is required by GAAP for the purpose of external reporting”.

Variable Costing: Managers frequently use variable costing for internal purposes for taking decision making. The cost of goods manufactured includes direct materials, direct labor, and variable factory overhead. Fixed factory overhead treated as period (fixed) expense.

State the difference between absorption costing and variable costing as follows:

Under absorption costing, the products costs are the cost that are assigned to the units of product as fixed manufacturing-overhead costs.
Under variable costing, the products costs are not assigned to the units of product as fixed manufacturing-overhead costs, instead it is treated as a period costs and expensed during the period in which it is incurred.

Answer 8

Expert Solution & Answer

To determine

State the difference between absorption costing and variable costing.

Explanation of Solution

Absorption Costing: “Absorption costing is a method that allocates “direct labor, direct materials, fixed manufacturing overhead and variable manufacturing overhead” to products and it is required by GAAP for the purpose of external reporting”.

Variable Costing: Managers frequently use variable costing for internal purposes for taking decision making. The cost of goods manufactured includes direct materials, direct labor, and variable factory overhead. Fixed factory overhead treated as period (fixed) expense.

State the difference between absorption costing and variable costing as follows:

Under absorption costing, the products costs are the cost that are assigned to the units of product as fixed manufacturing-overhead costs.
Under variable costing, the products costs are not assigned to the units of product as fixed manufacturing-overhead costs, instead it is treated as a period costs and expensed during the period in which it is incurred.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

To determine

State the difference between absorption costing and variable costing.

Answer 12

Explanation of Solution

Absorption Costing: “Absorption costing is a method that allocates “direct labor, direct materials, fixed manufacturing overhead and variable manufacturing overhead” to products and it is required by GAAP for the purpose of external reporting”.

Variable Costing: Managers frequently use variable costing for internal purposes for taking decision making. The cost of goods manufactured includes direct materials, direct labor, and variable factory overhead. Fixed factory overhead treated as period (fixed) expense.

State the difference between absorption costing and variable costing as follows:

Under absorption costing, the products costs are the cost that are assigned to the units of product as fixed manufacturing-overhead costs.
Under variable costing, the products costs are not assigned to the units of product as fixed manufacturing-overhead costs, instead it is treated as a period costs and expensed during the period in which it is incurred.

Answer 13

Ch. 8 - Briefly explain the difference between absorption...Ch. 8 - Timing is the key in distinguishing between...Ch. 8 - The term direct costing is a misnomer. Variable...Ch. 8 - When inventory increases, will absorption-costing...Ch. 8 - Why do many managers prefer variable costing over...Ch. 8 - Explain why some management accountants believe...Ch. 8 - Prob. 7RQ Ch. 8 - Why do proponents of absorption costing argue that...Ch. 8 - Why do proponents of variable costing prefer...Ch. 8 - Which is more consistent with cost-volume-profit...

Briefly explain the difference between absorption costing and variable costing.

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