Accounting Test 2 CHPT 6

Relationship of fixed cost per unit
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Terms in this set (19)
What is absorption costing?All manufacturing costs are absorbed into the product cost... no period costs.What is absorption costing used for?Used for GAAP reporting/tax reportingWhat is variable Costing?Only variable manufacturing costs (DM DL, variable MOH) get treated as product costsHow is variable costing used?InternallyWhat is the difference between variable and absorption costing?Treatment of variable MOH... Treated as period or productWhy do managers prefer variable costing?Tells us the marginal cost of making one more unitUnder absorption managers can manipulate operating income bymaking extra inventoryBy what dollar amount will operating income differ between the two costing methods?Difference= Change in inventory in units*Fixed MOH per unitUnder what circumstances will variable costing and absorption costing result in the same operating income?When the number of units made equals the number of units sold