Variable Costing

1- Definition :
In variable be system, those courts of deed that vary with output are treated as proceeds cost. The building block product costs under variable be system consists of direct materials, direct labor and variable attribute of manufacturing overhead. Fixed manufacturing cost is not treated as a product costs under variable cost. Rather, glacial manufacturing cost is treated as a period cost and, the likes of selling and administrative expenses, it is charged off in its entirety against revenue each period.
covariant cost is some clipping referred to as direct be or marginal costing.

2- variety between Absorption costing method and Variable costing method
Under compactness costing system, all costs of business ( both(prenominal) variable and fixed) are treated as product costs.
The whole product cost consists of direct materials, direct labor and both variable and fixed overhead.
So, we can call this approach besides full costing method because all costs of intersection are included in the product cost.
3- The 5 mains advantages of the Variable costing method
Managers often assume that unit product costs are variable costs. This is a problem in submergence costing, since unit product costs are a combining of both fixed and variable costs.



Under variable costing, unit product costs do not contain fixed costs.
The impact of fixed costs on profits is accentuate under the variable costing and contribution approach. The total summate of fixed costs appears explicitly on the income statement.
Variable costing data make it easier to estimate the profitability of products, customers, and other segments of the business. With absorption costing, profitability is obscured by arbitrary allocations of fixed costs.
Variable costing ties in with cost control methods such as regular costs and flexible bud cast downs.
Variable costing net operational income is closer to net cash flow than absorption costing net operating income. This is particularly important for companies...If you want to get a full essay, order it on our website: Ordercustompaper.com



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