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absorption costing

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Q: Which costing method is used for external reporting purpose?
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Why marginal costing method not Suitable to be used by manufacturer for external financial reporting and tax purpose?

I think..... In marginal costing method only variable cost is considered as product cost and fixed cost is not considered as product cost. But in reality product cost include fixed and variable, thus both variable and fixed costs should be considered while allocating cost. Marginal costing is used for inside reporting and absorption costing is used for outsider to clarify the real cost of product........ Am i right? Please confirm it


Why is Variable costing is a good method for internal reporting especially?

It informs the management that how much any unit of product is helping towards recovering the fixed cost.


Which method of costing is used in printing press?

process costing


Differences between costing method and costing techniques?

Methods of Costing The cost of products or services is determined using several methods. The use of a given method is dictated by such factors as: the nature of cost units, the production process, the mode of cost accumulation, the duration of work etc. The following are the well established methods of costing a. Job / Batch costing b. Contract costing c. Process costing d. Service costing Techniques of Costing Irrespective of the type of costing method being applied there are various approaches that could be adopted. These are:  Full Absorption costing  Marginal costing  standard costing using  absorption costing  marginal costing


What costing method considers variable factory overhead a product cost?

variable costing


When to use marginal costing?

Marginal costing is the method of costing for evaluating the changes in total cost due to change in number of units produced.


What are the different methods of preparing income statement?

There are two methods of preparing Income Statement. They are:- 1. Absorption costing method. 2. variable Costing method.


What is the definition of an external method?

An external method can be defined as a method that includes an external modifier. This means the method will be put to use externally rather than internally.


What is the traditional costing formula?

Traditional costing is a method in accounting where the manufacturing overhead costs are allocated to the products manufactured. It is also called as conventional costing.


What are the main features of job costing method?

check


What is variable costing method?

method in which the costs to be inventoriedinclude only the variablemanufacturing costs. Fixed factory overhead is treated as a period cost-it is deducted along with the selling and administrative expenses in the period incurred. That is, Direct materials $xx Direct labor xx Variable factory overhead xx Product cost $xx Fixed factory overhead is treated as a period expense. Variable costing is used for internal management only. Its uses include: (1) inventory valuation and income determination; (2) relevant cost analysis; (3) break-even analysis and Cost-Volume-Profit (CVP) Analysis ; and (4) short-term decision-making. Variable costing is, however, not acceptable for external reporting or income tax reporting. Companies that use variable costing for internal reporting must convert to absorption costing for external reporting. Under absorption costing, the cost to be inventoried includes all manufacturing costs, both variable and fixed. Nonmanufacturing (operating) expenses, i.e., selling and administrative expenses, are treated as period expenses and thus are charged against the current revenue. Direct materials $xx Direct labor xx Variable factory overhead xx Fixed factory overhead xx Product cost $xx Two important facts are noted: 1. Effects of the two costing methods on net income: (a) When production exceeds sales, a larger net income will be reported under absorption costing. (b) When sales exceed production, a arger net income will be reported under direct costing. (c) When sales and production are equal, net income will be the same under both methods. 2. Reconciliation of the direct and absorption costing net income figures: (a) The difference in net income can be reconciled as follows: (b) the above formula works only if the fixed overhead rate per unit does not change between the periods.


The selection of an inventory costing method has no significant impact on the financial statements true or false?

The selection of an inventory costing method has no significant impact on the financial statements. true or false