ACVC notes 02

• Variable costing


  A method of inventory costing in which all variable manufacturing costs are included as inventoriable costs, and all fixed manufacturing costs are excluded from inventoriable cost and instead treated as cost of the period they incurred
• Variable costing


  • Used for management decisions (for internal reporting only) (Non-GAAP)
  • Used for decision making because it shows the amount of contribution margin
• Absorption costing


  A method of product costing in which all manufacturing costs, both fixed and variable, are treated as product inventoriable costs
• Absorption costing


  • Required by GAAP/PFRS
  • Required method for external reporting
  • Used in financial accounting
• Cost segregation


  According to behavior (whether fixed or variable)
• Principle (by matching principle)

  Cause and effect - if there's a sale, then there is something to recognize as expense (COGS)<|>Immediate recognition - once the cost incurred, it is recognized immediately as expense<|>Systematic allocation - applicable only to those expenses that are occurring every year, month, or period constantly
• Product cost


  Costs incurred in creating the product<|>Recognized as expenses that are under COGS<|>Direct cost when it comes to services
• Product cost


  • Inventoriable: Yes
  • Unsold products go to inventory, sold products go to COGS
  • Cost flow: From incurrence to inventory to profit or loss analysis
  • Accounting treatment: Capitalize first - after production, recognize as asset, before converting to expense (COGS)
• Period cost


  Costs incurred in operating the business<|>Expenses incurred during the period, such as general and administrative expenses, and selling expense or distribution cost
• Period cost


  • Inventoriable: No
  • When incurred, recognized immediately as expense
  • Cost flow: From incurrence to profit or loss analysis
  • Accounting treatment: Expense outright - no need to capitalize since not inventoriable