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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.
Not 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.
I 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
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