Absorption costing, Cost Accounting

Absorption Costing

The process described in this section by that net overheads are absorbed into production naturally enough is identified as absorption costing.  The absorption of net overheads into product costs has implications for performance measurement, and stock valuation and cost control and students should be aware about the process described is subject to criticism via some accountants and managers.

The criticism arises from the fact such overheads contain items, identified as fixed costs - that do not change when the activity level changes and that would now have to be paid whether there was no activity, as an example of rates - and items, identified as variable costs, that vary more or less directly along with activity, as an example of power consumption. To overcome some of the problems, an alternative way of costing has been developed, identified as marginal costing, that, though by using the process of absorption, eliminates fixed costs from the absorption process.

Posted Date: 2/5/2013 6:50:25 AM | Location : United States







Related Discussions:- Absorption costing, Assignment Help, Ask Question on Absorption costing, Get Answer, Expert's Help, Absorption costing Discussions

Write discussion on Absorption costing
Your posts are moderated
Related Questions
Accrued liabilities show expenses or obligations incurred in the earlier accounting period but the payment for similar will be made in the subsequent period. In several cases where

Developing and Insight into Labour and Material Variance The calculation of labour and material variances is not sufficient; we require knowing how the variance could have typ

what is a cost sheet? what are its advantages?

Generally Accepted Accounting Principles (GAAP) are guidelines for companies to follow as they prepare and issue financial statemnents. Let's start by getting an understanding of

The Pacific Manufacturing Company operates a job-order costing system and applies overhead cost to jobs on the basis of direct labor cost. Its predetermined overhead rate was based

Behavioral Classification of Costs Definition Cost behavior refers to the change in costs as increase or may decrease like the output level changes that are like we risin

a.         What are the major equity and/or debt securities investments? What amounts are reported in the balance sheet? How significant are those amounts to the company's overall

A company is investigating the effect on its cost of capital with respect to the tax rate. Suppose there is a capital structure of 20% debt, 10% preferred stock, and 70% common sto

Reasons for Cost Allocation 1. To provide comparison along with externally provided services:  It helps in assessing where to continue the contact or service outsiders. 2.

By the discussions we had previous, it is not tough to come to the conclusion that numerous factors influence the fund or net working capital needs. Fund needs vary along with t