Variable Costing and Analysis Chapter 19

Flashcards covering key terms and concepts from Chapter 19 on Variable Costing and Analysis.

Variable Costing

A product costing method that includes direct materials, direct labor, and variable overhead.

Absorption Costing

A product costing method that includes direct materials, direct labor, and both variable and fixed overhead.

GAAP

Generally Accepted Accounting Principles, which require absorption costing for external reporting.

Unit Cost

The cost to produce one unit of a product, computed under both absorption and variable costing.

Contribution Margin Ratio

The percentage of sales that remains after subtracting variable expenses.

Special Orders

Orders that are typically outside the regular sales activities and analyzed for pricing strategy.

Target Selling Price

The price determined by adding the target markup to the product cost per unit.

Overproduction

A situation in which absorption costing can lead to producing more units than are sold.

Income Statement

A financial statement used to report a company's financial performance over a specific period.

Fixed Costs

Costs that do not change with the level of production or sales.