Asked by Erica Doherty on Apr 24, 2024
Verified
When the number of units produced is equal to the number of units sold,net income reported under variable costing is identical to net income reported under absorption costing.
Variable Costing
An accounting method that only includes variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs, with fixed overhead expenses charged to the period they arise.
Absorption Costing
An accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed manufacturing overhead) in the cost of a product.
Net Income
The amount of revenue left over after all expenses and taxes have been deducted.
- Make a distinction between the concepts of absorption and variable costing, especially in terms of income reporting and cost management.
- Recognize the influence of manufacturing scales on profits when applying both costing techniques.
Verified Answer
Learning Objectives
- Make a distinction between the concepts of absorption and variable costing, especially in terms of income reporting and cost management.
- Recognize the influence of manufacturing scales on profits when applying both costing techniques.
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