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Full Cost Accounting

Full Cost Accounting. Also known as Absorption Costing. Why Full Costing?. What Does Full Costing Include?. Full Costing in Principle. Easiest Case: Single Product Company.

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Full Cost Accounting

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  1. Full Cost Accounting Also known as Absorption Costing

  2. Why Full Costing?

  3. What Does Full Costing Include?

  4. Full Costing in Principle

  5. Easiest Case: Single Product Company All costs – both variable and fixed – are simply added together and divided by the number of units produced/sold. This is known as “process costing”.

  6. Multi-Product companies

  7. Example: Recording Direct Costs

  8. Full Costing ( = “Absorption Costing”) ???

  9. √ X X √ X

  10. Direct Costs, Indirect Costs, and the Costing Objective The question as to what are direct or indirect costs depends in part upon what it is you are trying to cost. In general, the broader the costing objective, the more direct, and less indirect, costs there are. Defining costing objectives more broadly is much easier, but takes away from the power of full-costing, which can enable us to better assess the full cost of particular units of output, jobs, or customers.

  11. Review: Fixed and Variable Costs used in Cost-Volume-Profit Analysis

  12. Fixed Costs ≠ Indirect Costs and Variable Costs ≠ Direct Costs For example, a teacher’s salary is fixed in the short term, but is a direct cost of teaching students.

  13. Next Lecture

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