StudentShare solutions
Triangle menu

Variable costing - Assignment Example

Not dowloaded yet

Extract of sample
Variable costing

Despite the various methods of pricing a firm based on its industry should select the most effective method to the firm. Costing is the main function in every firm, the rational being every firm exists in its industry with the main aim as profit making. References 8 VARIABLE COSTING Executive summary This is a report about a review of marginal costing as used in the managerial accounting system. Certain terminologies associated with the concept of marginal costing are identified in the report. The report also defines logically certain terms like variable costs, fixed costs, CVP and breakeven analysis as the key concepts. It goes ahead to prove the rational and marginal costing concepts as used in short term decision making. Being a costing technique, several assumptions such as division of cost element into fixed costs and variable costs, variable cost being considered directly proportional to the production volume, fixed costs being constant throughout the production levels and is being shared according to the volume of production per unit, cost is only influenced by the volume output, and at all levels, the selling price would remain unchanged, are associated with it. The report analysis gives logical evidences in manufacturing, hospitality and airline industries, as where the technique is used. Through appraisal and evaluation, it has been found to be the basis for product and service costing; hence, it is critical to identify its strengths and weaknesses (Maher, Lanen & Rehan, 2005). A recommendation has been made in this report for the marginal costing to be used in the three industries for a short term after its comparison with other alternative methods. Reconciliation of absorption and marginal costing methods has been recommended in order to cater for both short term and long term decisions. In summary, every firm is advised to use a costing method which is relevant to the firm’s decision. Introduction Variable costing is a managerial accounting concept, which according to Managerial Accounting by Ray H. Garrison, Eric W. Noreen, and Peter C. Brewer, is a costing method which has only a variable cost in the unit product cost. From its definition, Variable costs are the costs that vary with corresponding changes in the level of production. Thus, we can say variable costs are directly proportional to the volume of production. The technique is majorly for short term decision making instances rather than for outside purposes. Other methods of costing may include manufacturing cost that does not consider differentiating the costs into either fixed or variable costs (Drucker, 1999). In manufacturing cost, we consider the direct materials, direct labor and manufacturing overhead. Under this managerial accounting concept, a logical relationship between direct materials inventory and the expenses (direct labor and manufacturing overhead) incurred in the production of the end product which is delivered to the market for sale. In this case, the inventory does not fully absorb the firm’s costs. The method considers cost of goods sold to be made solely as a variable cost because it does not include fixed manufacturing overhead from the cost of inventory. Since fixed inventory is always expensed in the current period, it is normally treated as a periodic cost as the capitalizing cost which forms part of the inventory cost is often referred to as product cost (Maskell & Bargerly, 2003). When marginal costing is used to mean the cost of goods which only includes variable in its unit product cost, then variable costing may also be linked to this meaning. Variable costing ...Show more

Summary

Costing is one of the managerial accounting functions which needs a careful selection and evaluation of the effectiveness of every technique.Despite the various methods of pricing a firm based on its industry should select the most effective method to the firm…
Author : cruickshankkim
Variable costing essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the assignment on your topic
"Variable costing"
with a personal 20% discount.
Grab the best paper

Related Essays

Traditional Absorption Costing versus Activity Based Costing
The allocation of overheads has always been a matter of concern in manufacturing businesses especially in recent times. The method used in allocating overheads plays a role in the determination of the comparability of the costs of doing business vis-à-vis the cost to competitors.
12 pages (3000 words) Assignment
Absorption costing and marginal costing
by increasing the production of the product and as such produced 45,000 units with a thought that by putting the pressure, the selling agents could push the products more than the estimated sales into the market. However, only 20,000 units could be sold for which the profit
9 pages (2250 words) Assignment
Absorption costing and marginal costing compared
It means both fixed and variable costs are deducted from sales proceeds to ascertain profit. Naturally, the profit shown under full costing method is the
9 pages (2250 words) Assignment
Compare and contrast absorption costing
sically encompasses the estimation of the costs of goods and services so as to provide information to management and facilitate management decision making. As such in deciding between various costing methods one must keep the ultimate objective in mind: which method is most
10 pages (2500 words) Assignment
Article review for managerial accounting
The author also discusses how overheads can be the main factor of a company’s fall out if they are not careful. This is because; some of the expenses
3 pages (750 words) Assignment
A critical evaluation and appraisal of variable costing
References 8 This is a report about a review of marginal costing as used in the managerial accounting system. Certain terminologies associated with
6 pages (1500 words) Assignment
Exercise 2
What is the net operating income for the month using the variable costing method? Question 9: Cung Inc. has some material that originally cost $68,400. The material has a scrap value of $30,100 as is, but if
5 pages (1250 words) Assignment
Management accounting assessment
A change in the production methods and technology combined with the high rate by which new products are emerging; there have been changes in overhead costs. Nowadays there are additional overhead costs such as IT, quality control,
3 pages (750 words) Assignment
Participation Exercise #8
Absorption costing is a system of accounting that takes into account the all costs incurred in the production process ranging from direct costs of labor, and materials. It also considers the fixed and variable costs referred to as
1 pages (250 words) Assignment
Managerial Accounting
By Absorption Costing method, that is, pricing at 128 in 2013 and 160 in 2014, the net operating income will be the same in both years whereas by Variable Costing method, pricing at 120 and 144, the net operating cost
5 pages (1250 words) Assignment
Get a custom paper written
by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT
Comments (0)
Rate this paper:
Thank you! Your comment has been sent and will be posted after moderation