Product Costing. - Essay Example

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Product Costing.

This implies that, the cost of a finished unit in inventory will include direct materials and labor, and both fixed and variable manufacturing overheads. It is notable that, absorption costing is the most preferred method for external reporting as per the Generally Accepted Accounting Principles (GAAP). Absorption costing is fundamental in tracing the variable costs of production and the fixed costs attributed to the production of the product (Riahi, 2001). It is imperative to note that, absorption costing is dissimilar from the other costing methods since it takes into account fixed manufacturing overhead (the counting expenses ) such as factory rent, utilities and amortization (Riahi, 2001). Absorption costing forms three different types of costing, which include job order costing, process and ABC costing. Job order costing Considering the job order costing, the costs are assigned to the product in Batches or lots (Avis & Killick, 2009). Job order method is used in companies that offer bespoke or distinctive products or services. It is common in service industries that, serve customers with inimitable needs. ...Show more

Summary

Absorption Costing By [Name of Student] [Name of University] [Date] Table of contents Introduction………………………………………….3 Absorption costing……………………………………3 Job costing order……………………………4 Process costing………………………………5 ABC Approach………………………….……
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