The MAIN DIFFERENCE is the treatment of FIXED COSTS. This treatment can produce different profit figures.The two methods of costing produce different profit levels dependent upon the net change in the level of stock during the period.This is due to the VALUATION of the net change in stock during the period. In [...]
Over/(Under) Absorption Of Overheads
In earlier articles, we discussed about absorption costing, its advantages and disadvantages and its various methodogies. This article discuss about the over or under absorption of overheads:-
Over or Under Absorption
Note that as long as planned level of activity and the actual level of activity is not the same there is always an Over or Under Absorption [...]
What Is Absorption Costing, Its Advantages And Disadvantages
What Is Absorption Costing, Its Advantages And Disadvantages This article deals with the basic understanding of what is absorption costing and its pros and cons.
What is Absorption Costing?
It is a costing technique where all normal costs whether it is variable or fixed costs are charged to cost units produced.
Unlike marginal costing which take the fixed [...]
Overheads: The Different Types Of Absorption Methods.
There are many ways to absorb overheads which are as follows:
DIRECT MATERIAL COST PERCENTAGE
Suitable in situations where:
the material value has some relationship with the overheads;
quality and prices of materials do not vary drastically;
quantity and cost of materials in each product is almost the same and
where processing is uniform
overheads are time-based where there is little [...]
Marginal Costing: Its Features, Advantages And Disadvantages.
What is Marginal Costing?
It is a costing technique where only variable cost or direct cost will be charged to the cost unit produced.
Marginal costing also shows the effect on profit of changes in...