Presentation on theme: "Variable Costing & Segmented Reporting"— Presentation transcript: 1 Variable Costing & Segmented Reporting Show
2 Agenda Variable vs Absorption (or Full) Costing 3 Overview of Variable and Absorption Costing
4 Unit Cost Computations 5 Unit Cost Computations
6 Variable and Absorption Costing Income Statements
7 Variable Costing Contribution Format Income Statement
8 Absorption Costing Income Statement 9 Extended Comparisons of Income Data Hy Company – Year Two 10 Variable Costing Contribution Format Income Statement
11 Absorption Costing Income Statement 12 Summary of Key Insights 13 Explaining Changes in
Net Operating Income
14 Inventory as a lever to Net Income 15 Inventory as a lever to Net Income 16 Inventory as a lever to Net Income 17 Inventory as a lever to Net Income
18 Inventory as a lever to Net Income 19 Keys to Segmented Income
Statements
20 Identifying Traceable Fixed Costs
21 Identifying Traceable Fixed Costs 22 Identifying Common Fixed Costs
23 Identifying Common Fixed Costs
24 Common vs Traceable Costs 25 Common vs Traceable Costs
26 Traceable Costs Can Become Common Costs 27 Traceable Costs Can Become Common Costs 28 Segment Margin The segment margin, which is computed by subtracting the traceable fixed costs of a segment from its contribution margin, is the best gauge of
the long-run profitability of a segment. A segment margin is computed by subtracting the traceable fixed costs of a segment from its contribution margin. The segment margin is a valuable tool for assessing the long-run profitability of a segment. Profits Time 29 Common
Costs and Segments 30 Common Costs and Segments 31
Review Variable versus Absorption Costing (or Full Costing) What is segmented income statement?A segmented income statement provides additional detail, breaking down revenues and expenses by business unit, such as product line, location, department, salesperson, or territory. This breakdown helps management identify underperforming segments and develop strategies for boosting profits.
What is fixed manufacturing overhead when using variable costing?Under variable costing, fixed manufacturing overhead is treated as a period cost and is charged in full against the current period's income. 7-2 Selling and administrative expenses are treated as period costs under both variable costing and absorption costing.
Which of the following are product costs under absorption costing?Under absorption costing, product costs include all manufacturing costs: Direct materials. Direct labor. Variable manufacturing overhead.
What level of activity is performed each time an item of a product is produced multiple choice question?Unit‐level activities occur every time a service is performed or a product is made. The costs of direct materials, direct labor, and machine maintenance are examples of unit‐level activities.
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