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فيديو شرح Absorption Costing ضمن كورس محاسبة التكاليف شرح قناة Farhat Lectures. The # 1 CPA & Accounting Courses، الفديو رقم 53 مجانى معتمد اونلاين
What is absorption costing and how does it differ from variable costing? In this lecture, Professor Farhat gives a comprehensive overview of absorption (full) costing and variable (contribution margin) costing, explaining how each treats fixed manufacturing overhead and why the two methods can report different operating income. You'll learn when income is the same, when it diverges, and why the totals equalize over the long run — key concepts for the CPA Exam (BAR) and CMA exam. Ideal for accounting students and CPA and CMA candidates studying cost and managerial accounting.
Try it free at farhatlectures.com — interactive exercises, lectures, simulations, cases, multiple choice, and AI tools for CPA, CMA, EA and students.
Video Timeline & Key Concepts:
0:00 — Introduction
0:07 — Absorption vs. Variable Costing defined
8:18 — When units produced equal units sold
11:16 — When production exceeds sales
16:33 — When sales exceed production
21:13 — Long-term perspective: totals converge
Frequently Asked Questions:
What is absorption costing?
Absorption costing, also called full costing, treats all manufacturing costs as product costs, including direct materials, direct labor, and both variable and fixed manufacturing overhead. It is the method required by GAAP for external financial reporting.
What is variable costing?
Variable costing includes only variable manufacturing costs in the product cost and treats fixed manufacturing overhead as a period cost that is expensed immediately. It is used primarily for internal decision making.
When do absorption and variable costing report the same operating income?
They report the same operating income when units produced equal units sold. In that case there is no change in inventory, so no fixed overhead is deferred or released.
Why does absorption costing show higher income when production exceeds sales?
When more units are produced than sold, part of the fixed manufacturing overhead is deferred in ending inventory under absorption costing. Because that cost has not been expensed yet, absorption costing reports higher operating income than variable costing.
Do the two methods ever produce the same total income?
Yes. Over multiple periods, once all inventory is eventually sold, total operating income is identical under both methods because all costs eventually flow through the income statement.
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