Penentuan Kos Variabel PERTEMUAN 7
KEMAMPUAN AKHIR YANG DIHARAPKAN
Mahasiswa dapat menjelaskan : pengertian,
manfaat dan pandangan harga pokok variabel, perbedaan antara harga pokok variabel dan Full Costing., manfaat informasi yang dapat diperoleh dari penentuan harga pokok variabel, dan
penentuan harga pokok variabel di dalam
Managerial Accounting
by James Jiambalvo
Chapter 5:
Variable Costing
Slides Prepared by:
Scott Peterson
Northern State
Full (Absorption) Costing
1.
Full (Absorption) Costing includes:
a.
Direct material
b.Direct labor
c.
Manufacturing overhead (both
variable and fixed)
2.
Decision making and “what-if”
decisions are difficult because of the
commingling of fixed and variable
overhead.
Variable Costing
1.
Variable Costing includes:
a.
Direct material
b.
Direct labor
c.
Variable Manufacturing overhead
2.
Variable Costing lends itself well to
decision making and “what-if”
analyses.
Differences Between Full
(Absorption) and Variable Costing
1.
Fixed manufacturing overhead
(included in Full Costing).
2.
Fixed manufacturing costs, like
depreciation, are a period
expense on the income statement
under variable costing.
3.
Fixed manufacturing costs, like
Variable Costing Income
Statement
1. The format uses a contribution margin
approach.
Variable Costing Income
Statement Example
Sales $100,000
Less Variable:
Variable COGS $20,000 Variable Selling 10,000
Variable Admin. 5,000 35,000 Contribution Margin 65,000 Less Fixed:
Fixed Mfg. 10,000 Fixed Selling 8,000
Fixed Admin 7,000 25,000
Full (Absorption) Costing Income
Statement Example
Sales
$100,000
Less COGS
30,000
Gross Margin
70,000
Less Selling and Admin:
Selling
18,000
Admin
12,000
30,000
Effects of Production on Income for Full
Versus Variable Costing: Clausen Tube
Facts:
5,000 units produced and sold
Selling Price: $2,000 per unit
Variable Manufacturing:
Direct Materials: $600 per unit
Direct Labor: $225 per unit
Variable MFG: $75 per unit
Fixed Manufacturing: $1,200,000 per year
Selling Expense: $40 per unit variable plus $100,000 fixed.
Clausen Tube Income Statement: Full
Costing
Sales
$10,000,000
Less COGS
5,700,000
Gross Margin
4,300,000
Less Selling and Admin:
Selling
$300,000
Admin
500,000 800,000
Clausen Tube Income Statement:
Variable Costing
Sales $10,000,000
Less Variable:
Variable COGS $4,500,000 Variable Selling
and Admin 200,000
Contribution Margin 5,300,000 Less Fixed:
Fixed Mfg. 1,200,000 Fixed Selling 100,000
Variable Costing Income
Statement: Considerations
1. When sales volume and production
volume are exactly equal, net income
is the same under either full or variable
costing.
2. Contribution margin is easily calculated
under variable costing: 2,000 – 940 =
1,060.
Clausen Tube: Production is Greater
Than Sales
Facts:
6,000 units produced and 4,800 units sold
Selling Price: $2,000 per unit
Variable Manufacturing:
Direct Materials: $600 per unit
Direct Labor: $225 per unit
Variable MFG: $75 per unit
Fixed Manufacturing: $1,200,000 per year
Selling Expense: $40 per unit variable plus $100,000 fixed.
Clausen Tube Income Statement: Full
Costing-- Production > Sales
Sales
$ 9,600,000
Less COGS
5,280,000
Gross Margin
4,320,000
Less Selling and Admin:
Selling
$292,200
Admin
500,000 792,200
Clausen Tube Income Statement:
Variable Costing-- Production > Sales
Sales $ 9,600,000
Less Variable:
Variable COGS $4,320,000 Variable Selling
and Admin 192,000
Contribution Margin 5,088,000 Less Fixed:
Fixed Mfg. 1,200,000 Fixed Selling 100,000
Variable Costing Income Statement:
Considerations-- Production > Sales
1. Net income is higher under full costing
than variable costing.
2. $3,528,000 vs. $3,288,000 = $240,000
3. The $240,000 difference is due to the
1,200 (6,000 – 4,800) additional units
produced and unsold.
4. Fixed manufacturing $1,200,000 /
Summary of Effects of
Production on Net Income
If units produced = units sold, then no
difference between full costing and
variable costing net income.
If units produced > units sold, then full
costing net income is greater than
variable costing net income.
Impact of JIT on the Income
Effects of Full Versus Variable
Costing
1. JIT (Just-In-Time) inventory systems
lead to low inventories.
2. Results in little difference between
production and sales.
Benefits of Variable Costing for
Internal Reporting
1. Variable costing facilitates C-V-P
analysis because it uses a
“contribution” approach.
2. Variable costing mitigates the effects of
earnings management because fixed
manufacturing costs are not
Quick Review Question #1
1.
Which of the following lends itself well
to C-V-P Analysis?
a.
Full Costing
b.
Absorption Costing
c.
Variable Costing
Quick Review Answer #1
1.
Which of the following lends itself well
to C-V-P Analysis?
a.
Full Costing
b.
Absorption Costing
c.
Variable Costing
Quick Review Question #2
2.
Units produced = 2,000, units sold =
1,800, contribution margin ratio is 37%,
fixed S & A expenses are $90,000.
Fixed mfg. Expenses are $80,200 By
how much is net income greater under
full costing than variable costing?
Quick Review Answer #2
2. Units produced = 2,000, units sold = 1,800,
contribution margin ratio is 37%, fixed S & A expenses are $90,000. Fixed mfg. Expenses are $80,200 By how much is net income
greater under full costing than variable costing?
Quick Review Question #3
3.
Which of the following complies with
GAAP for external reporting purposes?
a.
Absolute costing
b.
Variable costing
c.
Fixed costing
Quick Review Answer #3
3.
Which of the following complies with
GAAP for external reporting purposes?
a.
Absolute costing
b.
Variable costing
c.
Fixed costing
Quick Review Question #4
4.
Which of the following lends itself well
to internal decision making?
a.
Full costing
b.
Variable costing
c.
Absorption costing
Quick Review Answer #4
4.
Which of the following lends itself well
to internal decision making?
a.
Full costing
b.
Variable costing
c.
Absorption costing
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Learning Objective 1
Explain how variable
Explain how variable
costing differs from
costing differs from
absorption costing and
absorption costing and
compute unit product
compute unit product
costs under each method.
Overview of Absorption and Variable
Costing
Direct Materials
Direct Labor
Variable Manufacturing Overhead
Fixed Manufacturing Overhead
Variable Selling and Administrative Expenses
Fixed Selling and Administrative Expenses
Quick Check
Which method will produce the highest values for
work in process and finished goods inventories?
a. Absorption costing.
b. Variable costing.
c. They produce the same values for these
inventories.
d. It depends. . .
Which method will produce the highest values for
work in process and finished goods inventories?
a. Absorption costing.
b. Variable costing.
c. They produce the same values for these
inventories.
Which method will produce the highest values for
work in process and finished goods inventories?
a. Absorption costing.
b. Variable costing.
c. They produce the same values for these
inventories.
d. It depends. . .
Which method will produce the highest values for
work in process and finished goods inventories?
a. Absorption costing.
b. Variable costing.
c. They produce the same values for these
inventories.
d. It depends. . .
Unit
product cost
is determined as follows:
Under absorption costing, all production costs, variable and fixed, are included when determining unit product
cost. Under variable costing, only the variable production costs are included in product costs.
Learning Objective 2
Prepare income
Prepare income
statements using both
statements using both
variable and absorption
variable and absorption
costing.
Income Comparison of
Absorption and Variable Costing
Let’s assume the following additional information
for Harvey Company.
20,000 units were sold during the year at a price
of $30 each.
There is no beginning inventory.
Now, let’s compute net operating
income using both absorption
Absorption Costing
Variable Costing
Sales (20,000 × $30) $ 600,000
Less variable expenses:
Beginning inventory $ Add COGM (25,000 × $10) 250,000 Goods available for sale 250,000 Less ending inventory (5,000 × $10) 50,000 Variable cost of goods sold 200,000 Variable selling & administrative
expenses (20,000 × $3) 60,000 260,000
Contribution margin 340,000
Less fixed expenses:
Manufacturing overhead $ 150,000
Selling & administrative expenses 100,000 250,000
Net operating income $ 90,000
Variable Costing
Sales (20,000 × $30) $ 600,000
Less variable expenses:
Beginning inventory $
Add COGM (25,000 × $10) 250,000 Goods available for sale 250,000
Less ending inventory (5,000 × $10) 50,000 Variable cost of goods sold 200,000 Variable selling & administrative
expenses (20,000 × $3) 60,000 260,000 Contribution margin 340,000
Less fixed expenses:
Manufacturing overhead $ 150,000
Selling & administrative expenses 100,000 250,000 Net operating income $ 90,000
Learning Objective 3
Reconcile variable costing
Reconcile variable costing
and absorption costing net
and absorption costing net
operating incomes and
operating incomes and
explain why the two
explain why the two
amounts differ.
Variable costing net operating income $ 90,000 Add: Fixed mfg. overhead costs
deferred in inventory
(5,000 units × $6 per unit) 30,000 Absorption costing net operating income $ 120,000
Variable costing net operating income $ 90,000 Add: Fixed mfg. overhead costs
deferred in inventory
(5,000 units × $6 per unit) 30,000 Absorption costing net operating income $ 120,000
Fixed mfg. overhead $150,000
Units produced 25,000 units= = $6 per unit
Unit Cost Computations
Since the variable costs per unit, total fixed costs,
Since the variable costs per unit, total fixed costs,
and the number of units produced remained
and the number of units produced remained
unchanged, the unit cost computations also
unchanged, the unit cost computations also
Absorption Costing
Sales (30,000 × $30) $ 900,000
Less cost of goods sold:
Beg. inventory (5,000 × $16) $ 80,000 Add COGM (25,000 × $16) 400,000 Goods available for sale 480,000
Less ending inventory - 480,000
Gross margin 420,000
Less selling & admin. exp.
Variable (30,000 × $3) $ 90,000
Fixed 100,000 190,000
Net operating income $ 230,000
Absorption Costing
Sales (30,000 × $30) $ 900,000
Less cost of goods sold:
Beg. inventory (5,000 × $16) $ 80,000
Add COGM (25,000 × $16) 400,000
Goods available for sale 480,000
Less ending inventory - 480,000
Gross margin 420,000
Less selling & admin. exp.
Variable (30,000 × $3) $ 90,000
Fixed 100,000 190,000
Net operating income $ 230,000
Absorption Costing
Fixed manufacturing overhead released from inventory is 5,000 units × $6 = $30,000.
Unit product
Variable Costing
All fixed manufacturing
overhead is expensed.
Variable manufacturing
Variable costing net operating income $ 260,000 Deduct: Fixed manufacturing overhead
costs released from inventory
(5,000 units × $6 per unit) 30,000 Absorption costing net operating income $ 230,000
We can reconcile the difference between
absorption and variable income as follows:
Fixed mfg. overhead $150,000
Units produced 25,000 units= = $6 per unit
Learning Objective 4
Understand the
Understand the
advantages and
advantages and
disadvantages of both
disadvantages of both
variable and absorption
variable and absorption
costing.
Impact on the Manager
Opponents of absorption costing argue that shifting fixed manufacturing overhead costs between periods can lead to faulty decisions.
Opponents of absorption costing argue that shifting fixed manufacturing overhead costs between periods can lead to faulty decisions.
These opponents argue that variable costing income
statements are easier to understand because net operating income is only affected by changes in unit sales. This
produces net operating income figures that are consistent with managers’ expectations.
These opponents argue that variable costing income
statements are easier to understand because net operating income is only affected by changes in unit sales. This
CVP Analysis, Decision Making
and Absorption costing
Absorption costing does not dovetail with CVP analysis,
nor does it support decision making. It treats fixed
manufacturing overhead as a variable cost. It assigns per
unit fixed manufacturing overhead costs to production.
Treating fixed manufacturing overhead as a variable cost can:
• Lead to faulty pricing decisions and faulty keep-or-drop decisions.
Treating fixed manufacturing overhead as a variable cost can:
• Lead to faulty pricing decisions and faulty keep-or-drop decisions.
Assigning per unit fixed manufacturing overhead costs to production can:
• Potentially produce positive net operating income even when the number of units sold is less than the breakeven point.
Assigning per unit fixed manufacturing overhead costs to production can:
External Reporting and Income Taxes
To conform to
To conform to
GAAP requirements,
GAAP requirements,
absorption costing must be used for
absorption costing must be used for
external financial reports in the
external financial reports in the
United States.
United States. To conform to
To conform to
GAAP requirements,
GAAP requirements,
absorption costing must be used for
absorption costing must be used for
external financial reports in the
external financial reports in the
United States.
United States. Reform Act of 1986,Under the Tax
absorption costing must be used when filling out
income tax returns. Under the Tax Reform Act of 1986,
absorption costing must be used when filling out
income tax returns. Since top executives
are typically evaluated based on earnings reported to shareholders in external reports, they may feel that
decisions should be based on absorption costing data.
Since top executives
are typically evaluated based on earnings reported to shareholders in external reports, they may feel that
Advantages of Variable Costing
and the Contribution Approach
Advantages
Management finds it more useful.
Consistent with CVP analysis.
Net operating income is closer to
net cash flow.
Profit is not affected by changes in inventories.
Consistent with standard costs and flexible budgeting.
Impact of fixed costs on profits
emphasized.
Variable Costing
Variable versus Absorption Costing
Fixed manufacturing costs must be assigned
to products to properly match revenues and
costs.
Fixed manufacturing costs are capacity costs
and will be incurred even if nothing is
Variable Costing and the Theory of
Constraints (TOC)
Companies involved in TOC use a form of variable
costing. However, one difference of the TOC approach
is that it treats direct labor as a fixed cost for three
reasons:
Many companies have a commitment to guarantee
workers a minimum number of paid hours.
Direct labor is usually not the constraint.
TOC emphasizes the role direct laborers play in driving
continuous improvement. Since layoffs often devastate morale, managers involved in TOC are extremely
Impact of Lean Production
When companies use Lean Production . . .
Production
tends to equal
sales . . .
