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Questions and Answers
What is the primary difference between Absorption Costing and Variable Costing?
What is the primary difference between Absorption Costing and Variable Costing?
The primary difference is that Absorption Costing includes all manufacturing costs (fixed and variable) in product costs, while Variable Costing only includes variable manufacturing costs.
How would you reconcile the income statement amounts between Absorption Costing and Variable Costing if inventory increases?
How would you reconcile the income statement amounts between Absorption Costing and Variable Costing if inventory increases?
To reconcile, subtract the Difference, which is calculated as Fixed Overhead (FOH) minus the Difference in Variable Cost Inventory (DVCWI).
What components are included in the Production Budget formula?
What components are included in the Production Budget formula?
The Production Budget formula is: PROD = SALES + Desired Ending Inventory (EI) – Beginning Inventory (BI).
Explain the purpose of a Cash Budget in the budgeting process.
Explain the purpose of a Cash Budget in the budgeting process.
What are traceable fixed costs and common fixed costs in segment reporting?
What are traceable fixed costs and common fixed costs in segment reporting?
Flashcards
Absorption Costing
Absorption Costing
A method of costing where all manufacturing costs (direct materials, direct labor, and variable and fixed overhead) are included in the cost of a product.
Variable Costing
Variable Costing
A method of costing that includes only variable manufacturing costs (direct materials, direct labor, and variable overhead) in the cost of a product.
Segment Margin
Segment Margin
Segment margin is the revenue of a business segment less its traceable fixed costs. It indicates the profitability of each segment.
Production Budget Formula
Production Budget Formula
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Cash Budget
Cash Budget
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