Question

• Compare and contrast the difference between variable and full costing.
• Describe why income calculated under full absorption costing will be greater than income calculated under variable costing when production exceeds sales.
• Explain how a manufacturing company can "bury" fixed manufacturing costs in ending inventory under full absorption costing.

***IT DOES NOT HAVE TO BE LONG**

Answer 1

1. Compare and contrast the difference between variable and full costing:-

• Full costing is otherwise called as ingestion costing.
• The real distinction between ingestion costing and full costing is the treatment of fixed assembling overhead expenses.
• Under Variable costing technique fixed assembling overhead expenses are expensed in the period in which they are incurred.
• where as in full costing strategy fixed assembling overhead expenses are expensed just when the item is sold.

2. Describe why income calculated under full absorption costing will be greater than income calculated under variable costing when production exceeds sales:-

• The thing that matters is because of the treatment in fixed overhead assembling expenses.
• Fixed overhead assembling is the piece of completion stock under the ingestion costing framework.
• Under factor costing fixed assembling overhead isn't the piece of item cost yet incorporated into pay articulation and there is no fixed expense in closure stock.
• Fixed assembling overhead is treated as item cost in assimilation costing.

3. Explain how a manufacturing company can "bury" fixed manufacturing costs in ending inventory under full absorption costing:-

• Fixed generation cost per unit can be determined by separating the all out fixed creation costs by the quantity of units delivered.
• An organization can cover the fixed expenses in stock by over producing.More the creation of the organization, more the fixed cost remains decline