Standard Costing and Basic Variance Analysis (part 5)

Basic Variance Analysis: Please note that this lecture relates to Chapter 13 of the Course Notes and not Chapter 12 as stated in the lecture.

1. cecel says:

Thanks John,
understand it much better now!

2. Very helpful….summative example and really on point! BIG UP.

3. loopheichuen says:

Can someone help me out here? why are we not absorbing fixed overhead but we are including fixed overhead expenditure in Marginal Costing?

• johnmoffat says:

@loopheichuen, The marginal cost means the variable cost – so by definition we do not absorb fixed overheads into the unit cost.
However, fixed overheads still exist and remain an expense and so affect the profit.
Its simply that with marginal costing we subtract the total fixed overheads (and therefore have an expenditure variance if the total is more or less than budget).
With absorption costing the fixed overheads are absorbed and so in addition to the variance due to the total being more or less than the total budgeted, we have the volume variance because if we produce more or less than budget we will have absorbed more or less than we should have.

• loopheichuen says:

@johnmoffat, Thank you very much sir! i finally understood.

4. ashif83 says:

really fantastic explanation, thanks

5. dangolithu says:

Am sure i will pass, thank you so much

6. ghufran088 says:

Great! simple and nice to be learned…

7. lahya says:

Well explained. Thanks

8. sara1234 says:

Thank you very much, was stuck on difference between Absorption and Marginal costing Fixed oh variance and sales.
God bless you.

9. s1234 says:

Dear admin, why is fixed o/h included while calculating operating statement under marginal costing???
Fixed o/h shouldn’t be included…isn’t it???

• talhahmed says:

10. angelmsukwa says:

It is comprehensive. Thank you

11. yawgunner says:

very useful lectures but this one(ie part 5 of variance) is not opening

12. chandandabs says:

very helpful..gud luck to all…n thnx for lectures…

13. modeen says:

I wish every one a very good luck, including myself for the F5.

14. jmuslimov says:

thanks a lot!!!!

15. coolsara says:

Thank you very much
it is very usefull . . . i hope i will pass through

16. echojam says:

Thanx once more