What is variable costing

What is variable costing

Description/Paper Instructions

Variable costing

What is variable costing?

Variable costing is a method of accounting that assigns only variable costs to inventory and cost of goods sold. Fixed costs are expensed in the period in which they are incurred. This means that variable costing income statements will show a higher contribution margin than absorption costing income statements, which assign both variable and fixed costs to inventory.

Why use variable costing?

Variable costing is a useful tool for managers who need to make decisions about pricing, product mix, and production levels. By knowing the contribution margin per unit, managers can see how much profit each unit sold will generate. This information can be used to set prices that will maximize profits, or to determine which products to produce more of and which products to produce less of.

How does variable costing work?

Variable costing begins by identifying all of the costs incurred by a business. These costs are then classified as either variable or fixed. Variable costs are those that change in proportion to the volume of production. Fixed costs, on the other hand, do not change with the volume of production.

Once the costs have been classified, variable costing assigns only the variable costs to inventory and cost of goods sold. Fixed costs are expensed in the period in which they are incurred. This means that the variable costing income statement will show a higher contribution margin than the absorption costing income statement.

Example of variable costing

Let’s say a company produces widgets. The variable costs per widget are $10. The fixed costs for the company are $100,000. If the company produces and sells 10,000 widgets, the variable costing income statement will look like this:

Code snippet

Sales (10,000 widgets * $10/widget) $100,000

Variable costs (10,000 widgets * $10/widget) $100,000

Contribution margin $0

Fixed costs $100,000

Net income $(100,000)

Use code with caution. Learn more

As you can see, the contribution margin is $0. This is because the variable costs and fixed costs are equal. In other words, the company is breaking even.

Advantages of variable costing

There are several advantages to using variable costing. First, it is a simple and easy-to-understand method of accounting. Second, it provides managers with valuable information about the contribution margin per unit. This information can be used to make decisions about pricing, product mix, and production levels. Third, variable costing is consistent with the concept of marginal costing. Marginal costing is a method of determining the cost of producing one additional unit of output.

Disadvantages of variable costing

There are also a few disadvantages to using variable costing. First, it does not provide a complete picture of the costs incurred by a business. Fixed costs are still incurred, even if no units are produced. Second, variable costing can be misleading when comparing the profitability of different products. This is because the variable costing income statement does not take into account the fixed costs that are incurred to produce each product.

Conclusion

Variable costing is a useful tool for managers who need to make decisions about pricing, product mix, and production levels. However, it is important to be aware of the limitations of variable costing before using it to make decisions.

I hope this explanation of variable costing was helpful. Please let me know if you have any other questions.

What is variable costing

RUBRIC QUALITY OF RESPONSE NO RESPONSE POOR / UNSATISFACTORY SATISFACTORY GOOD EXCELLENT Content (worth a maximum of 50% of the total points) Zero points:  Student failed to submit the final paper. 20 points out of 50:  The essay illustrates poor understanding of the relevant material by failing to address or incorrectly addressing the relevant content; failing to identify or inaccurately explaining/defining key concepts/ideas; ignoring or incorrectly explaining key points/claims and the reasoning behind them; and/or incorrectly or inappropriately using terminology; and elements of the response are lacking. 30 points out of 50:  The essay illustrates a rudimentary understanding of the relevant material by mentioning but not full explaining the relevant content; identifying some of the key concepts/ideas though failing to fully or accurately explain many of them; using terminology, though sometimes inaccurately or inappropriately; and/or incorporating some key claims/points but failing to explain the reasoning behind them or doing so inaccurately.  Elements of the required response may also be lacking. 40 points out of 50:  The essay illustrates solid understanding of the relevant material by correctly addressing most of the relevant content; identifying and explaining most of the key concepts/ideas; using correct terminology; explaining the reasoning behind most of the key points/claims; and/or where necessary or useful, substantiating some points with accurate examples.  The answer is complete. 50 points:  The essay illustrates exemplary understanding of the relevant material by thoroughly and correctly addressing the relevant content; identifying and explaining all of the key concepts/ideas; using correct terminology explaining the reasoning behind key points/claims and substantiating, as necessary/useful, points with several accurate and illuminating examples.  No aspects of the required answer are missing. Use of Sources (worth a maximum of 20% of the total points). Zero points:  Student failed to include citations and/or references. Or the student failed to submit a final paper. 5 out 20 points:  Sources are seldom cited to support statements and/or format of citations are not recognizable as APA 6th Edition format. There are major errors in the formation of the references and citations. And/or there is a major reliance on highly questionable. The Student fails to provide an adequate synthesis of research collected for the paper. 10 out 20 points:  References to scholarly sources are occasionally given; many statements seem unsubstantiated.  Frequent errors in APA 6th Edition format, leaving the reader confused about the source of the information. There are significant errors of the formation in the references and citations. And/or there is a significant use of highly questionable sources. 15 out 20 points:  Credible Scholarly sources are used effectively support claims and are, for the most part, clear and fairly represented.  APA 6th Edition is used with only a few minor errors.  There are minor errors in reference and/or citations. And/or there is some use of questionable sources. 20 points:  Credible scholarly sources are used to give compelling evidence to support claims and are clearly and fairly represented.  APA 6th Edition format is used accurately and consistently. The student uses above the maximum required references in the development of the assignment. Grammar (worth maximum of 20% of total points) Zero points:  Student failed to submit the final paper. 5 points out of 20:  The paper does not communicate ideas/points clearly due to inappropriate use of terminology and vague language; thoughts and sentences are disjointed or incomprehensible; organization lacking; and/or numerous grammatical, spelling/punctuation errors  10 points out 20:  The paper is often unclear and difficult to follow due to some inappropriate terminology and/or vague language; ideas may be fragmented, wandering and/or repetitive; poor organization; and/or some grammatical, spelling, punctuation errors 15 points out of 20:  The paper is mostly clear as a result of appropriate use of terminology and minimal vagueness; no tangents and no repetition; fairly good organization; almost perfect grammar, spelling, punctuation, and word usage. 20 points:  The paper is clear, concise, and a pleasure to read as a result of appropriate and precise use of terminology; total coherence of thoughts and presentation and logical organization; and the essay is error free. Structure of the Paper (worth 10% of total points) Zero points:  Student failed to submit the final paper. 3 points out of 10: Student needs to develop better formatting skills. The paper omits significant structural elements required for and APA 6th edition paper. Formatting of the paper has major flaws. The paper does not conform to APA 6th edition requirements whatsoever. 5 points out of 10: Appearance of final paper demonstrates the student’s limited ability to format the paper. There are significant errors in formatting and/or the total omission of major components of an APA 6th edition paper. They can include the omission of the cover page, abstract, and page numbers. Additionally the page has major formatting issues with spacing or paragraph formation. Font size might not conform to size requirements.  The student also significantly writes too large or too short of and paper 7 points out of 10: Research paper presents an above-average use of formatting skills. The paper has slight errors within the paper. This can include small errors or omissions with the cover page, abstract, page number, and headers. There could be also slight formatting issues with the document spacing or the font Additionally the paper might slightly exceed or undershoot the specific number of required written pages for the assignment. 10 points: Student provides a high-caliber, formatted paper. This includes an APA 6th edition cover page, abstract, page number, headers and is double spaced in 12’ Times Roman Font. Additionally, the paper conforms to the specific number of required written pages and neither goes over or under the specified length of the paper.
GET THIS PROJECT NOW BY CLICKING ON THIS LINK TO PLACE THE ORDER CLICK ON THE LINK HERE:  https://essaysolver.com/orders/ordernow You Can Also Place the Order In www.perfectacademic.com/orders/ordernow / www.essaysolver.com/orders/ordernow
Do You Have Any Other Essay/Assignment/Class Project/Homework Related to this? Click Here Now [CLICK ME] and Have It Done by Our PhD Qualified Writers!!

PLACE THE ORDER WITH US TODAY AND GET A PERFECT SCORE!!!

Do You Have Any Other Essay/Assignment/Class Project/Homework Related to this? Click Here Now [CLICK ME] and Have It Done by Our PhD Qualified Writers!!

Why Work With Us!!

• Tired of getting an average grade in all your school assignments, projects, essays, and homework? Try us today for all your academic schoolwork needs. We are among the most trusted and recognized professional writing services in the market.

• We provide unique, original and plagiarism-free high quality academic, homework, assignments and essay submissions for all our clients. At our company, we capitalize on producing A+ Grades for all our clients and also ensure that you have smooth academic progress in all your school term and semesters.

• High-quality academic submissions, A 100% plagiarism-free submission, Meet even the most urgent deadlines, Provide our services to you at the most competitive rates in the market, Give you free revisions until you meet your desired grades and Provide you with 24/7 customer support service via calls or live chats.