Variable costing: a closer look

Article Abstract:

The amount of overhead and indirect costs included in inventory valuations determines whether the inventory costing method used is: direct, indirect, fully absorbed, or variable. Variable costing, an accounting method that excludes fixed overhead expenses from inventory valuations and product pricing calculations, is defended. This accounting method has been permitted for tax reporting purposes, financial statement reporting purposes, and legal defense purposes (by firms accused of unlawful pricing). The use of variable costing in each of these areas is traced historically, with references to accounting standards and court cases. Variable costing can create tax benefits for companies with large inventories, and is more consistent than other inventory valuation methods, in that it more closely approximates the accounting considerations of managers when making business decisions.

Analysis, Accounting, Direct costing

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Joint product costing in the semiconductor industry

Article Abstract:

The manufacturing of semiconductors is a joint processing situation whereby the production is made up of different quality chips from the same production run. There are three stages to the manufacturing process: fabrication, assembly, and testing. Joint costs may be allocated among joint products according to either the market value or the physical quantities of the various grades of microchips produced. For the production of semiconductors, the physical quantity technique allocates fabrication expenses in proportion to a physical measurement of the production, like usable bits or usable chips. Production cost allocation based upon bits, usable chips produced, net realizable value of chips produced, and production quantity data are examined and explained.

Prepackaged software, Semiconductor industry, Product management, Industrial productivity, Assets (Accounting), Inventories, Cost control

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Costing for warehousing and distribution. (activity-based costing)_

Article Abstract:

Organizations can improve the profitability of their warehousing and distribution activities by using activity-based costing (ABC). ABC is based on the concept that activities result in costs. Costs can be incurred at the unit level, batch level, product level, and facility level. ABC can help warehouse managers determine which rates to charge customers, which activities are being performed excessively, and what the total cost of a product line should be.

Warehousing, Distribution of goods, Distribution (Commerce)

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