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    msshantiray's Avatar
    msshantiray Posts: 1, Reputation: 1
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    #1

    Aug 16, 2009, 01:59 PM
    absorption and variable costing
    How do you calculate ending finished goods inventory cost under absorption costing and under variable costing? Trying to find the formula.
    rehmanvohra's Avatar
    rehmanvohra Posts: 739, Reputation: 27
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    #2

    Aug 16, 2009, 10:32 PM

    Absorption costing includes proportionate fixed production overhead costs in the cost of inventory and variable costing ignores these fixed costs.
    tsmcdonald's Avatar
    tsmcdonald Posts: 1, Reputation: 1
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    #3

    Oct 19, 2009, 07:28 PM

    Actual production in units = 50,000; sales in units = 40,000; sales price per unit = $30; variable manu. Cost per unit = 14; variable selling exp. Per unit = 2; fixed manu. Cost = 315,000; fixed selling exp. = 100,000; there is no beginning inventory. What is the absorption and variable income?
    rehmanvohra's Avatar
    rehmanvohra Posts: 739, Reputation: 27
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    #4

    Oct 19, 2009, 09:44 PM

    For absorption costing method:
    1. Calculate fixed manufacturing overhead rate: Fixed costs/Budgeted production
    2. Charge actual production with this rate
    3. Ending inventory will include fixed overhead charge applicable to units on hand

    For Marginal or Variable Costing method:
    1 Consider only the variable costs of production in valuing ending inventory.

    The difference in the profit under absorption and variable costing method is the element of fixed costs in the ending inventory.

    I am sure your text book has appropriate examples. I am sorry, I just can not solve the problem for you
    dsdiago65's Avatar
    dsdiago65 Posts: 1, Reputation: 1
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    #5

    Jan 23, 2010, 07:10 AM
    How to Calcula ending finished-goods inventory cost under absorption costing
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