Accounting discussion board

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Stellar Packaging Products Absorption and Variable Costing 

Absorption costing is the same thing as full costing. This costing method treats all manufacturing costs as product costs regardless of their behavior as variable or fixed. Variable costing, direct costing, or marginal costing associates products to costs that vary with units produced such as direct labor, direct labor and variable manufacturing overhead. These two methods carry or do not carry fixed overhead costs in ending inventory. Depending on how much ending inventory a company carries, variable costing and absorption costing would yield the same net income, or different net income figures. Explain with illustrations, examples, graphs, tables and/or narratives differences and similarities of these two costing methods.  The following steps would be helpful in addressing this discussion question successfully:

1- Define absorption costing and define variable costing.

2- Discuss their advantages and disadvantages.

3- Present a numerical example or tables of contribution income statements and absorption income statement for Stellar Packaging Products under three scenarios a) units produced equal units sold; b) units produced greater than units sold; c) units produced less than units sold. OR,

4-  Show in a contribution format income statement how fixed manufacturing costs and other fixed period costs are fully expensed and not assigned to ending inventory at Stellar Packaging products.

 

 Please use APA style and formatting. Provide scholarly sources and references to support your statements and arguments.

    • 6 years ago
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