Variable Costing
variable costing is a method of inventory costing in which all variable manufacturing costs are included as inventoriable costs. In variable costing method, all fixed manufacturing costs are excluded from inventoriable costs. They are instead treated as costs of the period in which they are incurred. Variable costing is a method of recording and reporting costs that regards only those manufacturing costs, which tend to vary directly with the volume of activity, as product costs. Variable costing is also known as 'Marginal Costing' or 'Direct Costing.
Product cost under variable costing:Direct material+ Direct labor+ Variable manufacturing costs
Period cost under variable costing:
Fixed manufacturing costs+ General & administration costs+ Selling and distribution costs
Absorption Costing
Absorption costing is the method of inventory costing in which all variable manufacturing costs and all fixed manufacturing costs are included in inventoriable costs. In absorption costing method, inventory 'absorbs' all manufacturing costs.Absorption costing is also known as 'Conventional Costing' or 'Full Costing'.
Product cost under absorption costing:
Direct material+Direct labor+Variable manufacturing costs+ Fixed manufacturing costs.
Period costs under absorption costing:
General & administrative costs + Selling and distribution costs.
variable costing is a method of inventory costing in which all variable manufacturing costs are included as inventoriable costs. In variable costing method, all fixed manufacturing costs are excluded from inventoriable costs. They are instead treated as costs of the period in which they are incurred. Variable costing is a method of recording and reporting costs that regards only those manufacturing costs, which tend to vary directly with the volume of activity, as product costs. Variable costing is also known as 'Marginal Costing' or 'Direct Costing.
Product cost under variable costing:Direct material+ Direct labor+ Variable manufacturing costs
Period cost under variable costing:
Fixed manufacturing costs+ General & administration costs+ Selling and distribution costs
Absorption Costing
Absorption costing is the method of inventory costing in which all variable manufacturing costs and all fixed manufacturing costs are included in inventoriable costs. In absorption costing method, inventory 'absorbs' all manufacturing costs.Absorption costing is also known as 'Conventional Costing' or 'Full Costing'.
Product cost under absorption costing:
Direct material+Direct labor+Variable manufacturing costs+ Fixed manufacturing costs.
Period costs under absorption costing:
General & administrative costs + Selling and distribution costs.
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