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8 Cards in this Set
- Front
- Back
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What is full or absorption costing
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each unit is asked to absorb a share of the fixed production overhead
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What is variable or direct costing
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The fixed costs are allocated as a lump sum
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When does a denominator variance arise
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when actual production does not equal planned production
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what happens to profit under absorption costing if more is produced then planned
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profits increase because more of the fixed overheads are parked in inventory costs
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What is the framework for decisions
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1) Define problem and list all alternatives
2) cost alternatives 3) Assess the qualitative factors 4) Make the decision |
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What are relevant costs
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They are ones which change as a result of the decision being contemplated
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What are relevant for decisions
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1) Furure costs
2) cash costs 3) avoidable costs 4) costs which differ among alternatives |
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Define contribution margin
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Sales - variable costs
Sale price - unit variable costs |
