• Appendix 6A: Super-Variable CostingAppendix 6A: Super-Variable Costing

    Super-variable costing classifies all direct labor and manufacturing overhead costs as fixed period costs and only direct materials as a variable product cost. To simplify, in this appendix we also assume that selling and administrative expenses are entirely fixed.

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  • Chapter 6: Variable Costing and Segment Reporting: Tools for ManagementChapter 6: Variable Costing and Segment Reporting: Tools for Management

    Let’s assume the following additional information for Harvey Company. 20,000 units were sold during the year at a price of $30 each. There is no beginning inventory. Now, let’s compute net operating income using both absorption and variable costing.

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  • Chapter 5: Cost-Volume-Profit RelationshipsChapter 5: Cost-Volume-Profit Relationships

    Key Assumptions of CVP Analysis Selling price is constant. Costs are linear and can be accurately divided into variable (constant per unit) and fixed (constant in total) elements. In multiproduct companies, the sales mix is constant. In manufacturing companies, inventories do not change (units produced = units sold).

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  • Appendix 4B: Service Department AllocationsAppendix 4B: Service Department Allocations

    There are three key points to understand regarding the step-down method:  In both the direct and step-down methods, any amount of the allocation base attributable to the service department whose cost is being allocated is always ignored.  Any amount of the allocation base that is attributable to a service department whose cost has al...

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  • Appendix 4A: FIFO MethodAppendix 4A: FIFO Method

    FIFO vs. Weighted-Average Method The FIFO method (generally considered more accurate than the weighted-average method) differs from the weighted-average method in two ways: The computation of equivalent units. The way in which the costs of beginning inventory are treated.

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  • Chapter 4: Process CostingChapter 4: Process Costing

    Similarities Between Job-Order and Process Costing Both systems assign material, labor, and overhead costs to products and they provide a mechanism for computing unit product costs. Both systems use the same manufacturing accounts, including Manufacturing Overhead, Raw Materials, Work in Process, and Finished Goods. The flow of costs through the...

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  • Appendix 3B: The Predetermined Overhead Rate and CapacityAppendix 3B: The Predetermined Overhead Rate and Capacity

    Calculating predetermined overhead rates using an estimated or budgeted amount allocation base. This method was used throughout the chapter; however, recently it has been criticized in two ways: Basing the predetermined overhead rate on budgeted activity results in product costs that fluctuate depending upon the activity level. Calculating prede...

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  • Appendix 3A: Activity-Based Absorption CostingAppendix 3A: Activity-Based Absorption Costing

    Activity-based absorption costing assigns all manufacturing overhead costs to products using activity cost pools instead of Plantwide or department cost pools.

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  • Chapter 3: Job-Order CostingChapter 3: Job-Order Costing

    Job-order costing systems are used when: Many different products are produced each period. Products are manufactured to order. The unique nature of each order requires tracing or allocating costs to each job, and maintaining cost records for each job.

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  • Appendix 2B: Cost of QualityAppendix 2B: Cost of Quality

    Quality of Conformance Costs incurred to prevent defects or that result from defects in products are known as quality costs. Many companies are working hard to reduce their quality costs. When the overwhelming majority of products produced conform to design specifications and are free from defects.

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