Kế toán, kiểm toán - Chapter 19: Variable costing and performance reporting

Financial and Managerial AccountingWild, Shaw, and Chiappetta Fourth Edition McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.Chapter 19Variable Costing and Performance ReportingConceptual Learning ObjectivesC1: Describe how absorption costing can result in over-production.C2: Explain the role of variable costing in pricing special orders.19-*A1: Compute and interpret breakeven volume in units.Analytical Learning Objectives19-*P1: Compute unit cost under both absorption and variable costing. P2: Prepare and analyze an income statement using absorption costing and using variable costing. P3: Prepare a contribution margin report.P4: Convert income under variable costing to the absorption cost basis.Procedural Learning Objectives19-* Absorption costing (also called full costing), assumes that products absorb all costs incurred to produce them.While widely used for financial reporting (GAAP), this costing method can result in misleading product cost information for business decisions. Absorption Costing & Variable CostingC119-*Absorption Costing & Variable CostingUnder variable costing, only costs that change in total with changes in production level are included in product costs.C219-*Distinguishing Between Absorption Costing and Variable Costing: Absorption CostingAbsorption CostingDirect MaterialsDirect LaborVariable OverheadFixed OverheadProduct CostP119-*Distinguishing Between Absorption Costing and Variable Costing: Variable CostingVariable CostingDirect MaterialsDirect LaborVariable OverheadFixed OverheadProduct CostPeriod Cost P119-*Difference Between Absorption Costing and Variable Costing: Computing Unit CostP119-*Difference Between Absorption Costing and Variable Costing: Computing Unit CostP119-*Analysis of Income Reporting for Both Absorption and Variable CostingP119-*Analysis of Income Reporting for Both Absorption and Variable Costing: Units Produced Equal Units SoldA119-*Analysis of Income Reporting for Both Absorption and Variable Costing: Units Produced Exceed Units SoldP219-*Analysis of Income Reporting for Both Absorption and Variable Costing: Units Produced Are Less Than Units SoldP219-*Income Reporting SummarizedP219-*Planning ProductionC1Producing too much inventoryExcess inventoryHigher storage and financing costsGreater risk of obsolescenceProducing too little inventoryLost salesCustomer dissatisfaction19-*Setting PricesOver the Long Run:Price must be high enough to cover all costs, including variable costs and fixed costs, and still provide an acceptable return to owners C219-*Setting PricesOver the Short Run:Fixed production costs such as the cost to maintain plant capacity do not change with changes in production levels. With excess capacity, increases in production level would increase variable production costs, but not fixed costs. While managers try to maintain the long-run price on existing orders, which covers all production costs, managers should accept special orders provided the special order price exceeds variable cost.C219-*Limitations of Reports Using Variable CostingP3Absorption costing is almost exclusively used for external reporting (GAAP). For income tax purposes, absorption costing is the only acceptable basis for filings with the Internal Revenue Service (IRS) under the Tax Reform Act of 1986.Absorption costing is the only acceptable basis for both external reporting and tax reporting. 19-*End of Chapter 1919-*