Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Variable vs Absorption
- This topic has 4 replies, 2 voices, and was last updated 8 years ago by John Moffat.
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- April 24, 2016 at 2:08 pm #312489
Please examine and correct these statements if required.
1- Variable costing treats all variable cost (even non manufacturing or manufacturing overheads ) as product cost.
2- absorption costing treats variable cost and manufacturing costs as product cost and non manufacturing cost ( variable TOO ) as period cost.
April 24, 2016 at 2:08 pm #312490Want to know if my concept is right.
April 24, 2016 at 2:21 pm #312493Not quite.
If you are valuing inventories then in both cases we only consider manufacturing costs (only variable ones if it is marginal costing, variable and fixed ones if it is absorption costing).
On the other hand, if you are wanting contribution, then it is selling price less all variable costs whether manufacturing or non-manufacturing.
However this is hardly of relevant for Paper F5 – it is in Paper F2 that you are examined on the differences between absorption and marginal costing.
Our free lectures for Paper F5 are a complete course and cover everything needed to be able to pass the exam well.
April 24, 2016 at 5:32 pm #312519I am attempting p5 and its being long when I studied f5 n f2.
So what I got from u is that it depends on whether we are measuring inventory or contribution that determines whether to include non- manufacturing cost or not.Thanks
April 25, 2016 at 6:30 am #312570That is correct 🙂
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