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variable costing
no its a product cost
Costing sheets in SAP determine how cost estimates calculate overhead costs.
Over costing and under costing occurs because overhead cost is applied first using some ratio to find out the cost of product before the process of production done and actual cost found.
What arguments are there in favor of treating fixed manufacturing overhead costs as product costs? As period costs?
variable costing
no its a product cost
Costing sheets in SAP determine how cost estimates calculate overhead costs.
Over costing and under costing occurs because overhead cost is applied first using some ratio to find out the cost of product before the process of production done and actual cost found.
What arguments are there in favor of treating fixed manufacturing overhead costs as product costs? As period costs?
Fixed manufacturing overhead costs are shifted from one period to another due to changes in inventories under absorption costing. Every unit that is produced is assigned some fixed manufacturing overhead costs. Assuming that the said unit is not sold during that period, the fixed manufacturing cost assigned to that unit will then become part of the inventory and reported on the balance sheet and not the cost of good sold.
One uses absorption costing taking into account direct and indirect materials labour and overhead.
marginal costing is recommended by IAS and absorption costing is not recommended by IAS,marginal costing is used for internal purposes and absorption costing is ysed for external purposes,in marginal costing the fixed production overheads are not calculated as a product cost and in absorption costing the fixed prodution overheads are calculated as product cost.
In absorption costing, overhead absorption rate or blanket rate is key to spread all overheads on production of volume of product, because if we don't have the overhead absorption rate manufacturing overhead cannot be spread or there is no basis for allocation of overheads on manufactured units.
needs of product costing system
The Absorption Cost all manufacturing costs; this includes: - direct materials (those materials that become an integral part of a finished product and can be conveniently traced into it) - direct labor (those factory labor costs that can be easily traced to individual units of product. Also called touch labor) - both variable and fixed manufacturing overhead in the cost of a unit of product. As a result, under absorption costing, fixed overhead is a product cost until sold.
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.