What is reflective analysis essay
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Essay reflective analysis What is
Variable Costing Method Essay
621 Words3 Pages
Introduction Variable Costing Method:
Method of variable costing is a method where costing can be discovered including the variable manufacturing costs. Fixed factory visual projection is delighted as a period cost-it is abstracted along with the selling and administrative expenses in the period deserved. That is,
Fixed factory visual projection is taking care as a period expense.
Uses of Variable Costing Method:
Variable costing method is used only for internal management. Uses of variable costing method include:
* Inventory estimation and revenue determination; * Break-even investigation and Cost-Volume-Profit investigation;
* Appropriate…show more content…
Important Facts of Variable Costing Method:
Two important facts are noted:
* Effects of the two costing methods on nett profits:
1. When manufacturing leads sales, a larger Nett profits will be accounted under absorption costing method. 2. When sales exceed manufacturing, arguer nett profits will be accounted under direct costing method. 3. When sales and production are equal, nett profits will be the same under both methods.
* Resolution of the direct costing method and absorption costing method Nett profits figures, the variation in net profits can be resigned as follow, (Difference in Nett Profit) = (Change in inventory) × (Fixed factory overhead rate).
Example for Variable Costing Method:
A company produces a single product that it sells for $9 per unit. During first year of processes 100,000 units were produced and 90,000 units were traded. Manufacturing costs and selling and administrative operating cost for the year was as follows,
Fixed Costs and Variable Costs: Direct materials → $1.75 per unit produced, Direct labor salaries → $1.53 per unit produced, and Factory operating costs → $0.50 per unit produced.
What was company’s nett profit