pccAAAChapter+7+VARIABLE+COSTING

Chapter 7 VARIABLE COSTINGChapter 7: VARIABLE COSTING ABSORPTION vs VARIABLE COSTING ABSORPTION (tra

Chapter7VARIABLECOSTING Chapter7:VARIABLECOSTING ABSORPTIONvsVARIABLECOSTING ABSORPTION(traditional,orfull)COSTING requiredbyGAAPforexternalreporting costsclassifiedbyfunction(i.e.productcostorperiodcost) allcostsofproductionincludedininventory/COGS productioncostsinclude: Directmaterials Directlabor Manufacturingoverhead(includesvariableandfixedcosts) VARIABLE(ordirect)COSTING moreusefulforinternalreporting,managementdecisionmaking,and CVPanalysis costsclassifiedbybehavior(i.e.variablecostsorfixedcosts) differsfromabsorptioncostingintreatmentoffixedmanufacturing overhead onlythevariableproductioncostsincludedininventory/COGS treatsallfixedcostsasperiodcosts INCOMESTATEMENTUSINGINCOMESTATEMENT ABSORPTIONCOSTINGUSINGVARIABLECOSTING SalesrevenueSalesrevenue --Costofgoodssold--Variablecostofgoodssold