《MPAcc财会专业英语》Chapter2.pdfVIP

Paper 2.4: Financial Management and Control Chapter2 Absorption and marginal costing (P15-42) Topic list (P15) • 1 The problem of overheads • 2 A revision of absorption costing • 3 Overhead apportionment • 4 Overhead absorption • 5 Marginal costing • 6 Reconciling the profit figures given by the two methods • 7 Absorption costing and marginal costing compared Introduction (P15) • Cost accumulation • Absorption costing • Marginal costing Study guide (P16) • Exam guide (P16) • Section A • Section B 1 The problem of overheads (P16) • Indirect costs, or overheads, are costs incurred in making a product or providing a service, but which cannot be traced to the product or service. • Absorption costing is a means of incorporating a fair share of these costs into the cost of a unit of product or service provided. • A direct cost is a cost that can be traced in full to the product, service or department that is being costed. 1.1 Using absorption costing to deal with the problem of overheads (P16) • 1.1.1 Theoretical justification for using absorption costing • 1.1.2 Practical reasons for using absorption costing • (a) Stock valuations • Cost of good sold = cost of goods produced + the value of opening stocks – the value of closing stocks • (b) Pricing decisions: by calculating the full cost of production or sales “Full cost plus pricing” • (c) Establishing the profitability of different products • 1.1.3 SSAP9: stock and long-term contracts 1.2 Using marginal costing to deal with the problem of overheads (P18) • Absorption costing can be misleading • Marginal costing: fixed costs should be dealt with separately. 2 A revision of absorption costing (P18) • Absorption costing is a tra