BAB 5 VARIABLE COSTING SEBAGAI ALAT BANTU MANAJEMEN
Chapter
5
Variable Costing:
A Tool for Management
Overview of Absorption and
Variable Costing
Absorption
Costing
Product costs
Variable
Costing
Direct materials
Direct labor
Variable mfg. overhead
Product costs
Fixed mfg. overhead
Period costs
Period costs
Irwin/McGraw-Hill
Selling & admin. exp.
© The McGraw-Hill Companies, Inc., 2000
Penghitungan Biaya per Unit
Harvey Co. memproduksi satu
produk jadi, berikut ini informasi :
Number of units produced annually
Variable costs per unit:
Direct materials, direct labor,
and variable mfg. overhead
Selling & administrative expenses
$
$
Fixed costs per year:
Manufacturing overhead
Selling & administrative expenses
$ 150,000
$ 100,000
Irwin/McGraw-Hill
25,000
10
3
© The McGraw-Hill Companies, Inc., 2000
Penghitungan Biaya per Unit
Unit product cost is determined as follows:
Direct materials, direct labor,
and variable mfg. overhead
Fixed mfg. overhead
($150,000 ÷ 25,000 units)
Unit product cost
Absorption
Costing
Variable
Costing
$
10
$
10
$
6
16
$
10
Selling and administrative expenses are
always treated as period expenses and
deducted from revenue.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
Income Comparison of Absorption
and Variable Costing
Harvey Co. had no beginning inventory, produced
25,000 units and sold 20,000 units this year.
Absorption Costing
Sales (20,000 × $30)
Less cost of goods sold:
Beginning inventory
$
Add COGM (25,000 × $16)
400,000
Goods available for sale
400,000
Ending inventory (5,000 × $16)
80,000
Gross margin
Less selling & admin. exp.
Variable
Fixed
Net income
Irwin/McGraw-Hill
$ 600,000
320,000
280,000
© The McGraw-Hill Companies, Inc., 2000
Income Comparison of Absorption
and Variable Costing
Harvey Co. had no beginning inventory, produced
25,000 units and sold 20,000 units this year.
Absorption Costing
Sales (20,000 × $30)
Less cost of goods sold:
Beginning inventory
$
Add COGM (25,000 × $16)
400,000
Goods available for sale
400,000
Ending inventory (5,000 × $16)
80,000
Gross margin
Less selling & admin. exp.
Variable (20,000 × $3)
$ 60,000
Fixed
100,000
Net income
Irwin/McGraw-Hill
$ 600,000
320,000
280,000
160,000
$ 120,000
© The McGraw-Hill Companies, Inc., 2000
Income Comparison of Absorption
and Variable Costing
Now let’s look at variable costing by Harvey Co.
Variable
costs
only.
Variable Costing
Sales (20,000 × $30)
Less variable expenses:
Beginning inventory
$
Add COGM (25,000 × $10)
250,000
Goods available for sale
250,000
Ending inventory (5,000 × $10)
50,000
Variable cost of goods sold
200,000
Variable selling & administrative
expenses (20,000 × $3)
60,000
Contribution margin
Less fixed expenses:
Manufacturing overhead
$ 150,000
Selling & administrative expenses 100,000
Net income
Irwin/McGraw-Hill
$ 600,000
All fixed
manufacturing
overhead is
expensed.
260,000
340,000
250,000
$ 90,000
© The McGraw-Hill Companies, Inc., 2000
Income Comparison of Absorption
and Variable Costing
Let’s compare the methods.
Cost of
Goods
Sold
Ending
Inventory
Absorption costing
Variable mfg. costs $ 200,000
Fixed mfg. costs
120,000
$ 320,000
$ 50,000
30,000
$ 80,000
Variable costing
Variable mfg. costs $ 200,000
Fixed mfg. costs
$ 200,000
$ 50,000
$ 50,000
Irwin/McGraw-Hill
Period
Expense
Total
© The McGraw-Hill Companies, Inc., 2000
Income Comparison of Absorption
and Variable Costing
Let’s compare the methods.
Cost of
Goods
Sold
Ending
Inventory
Period
Expense
Absorption costing
Variable mfg. costs $ 200,000
Fixed mfg. costs
120,000
$ 320,000
$ 50,000
30,000
$ 80,000
$
Variable costing
Variable mfg. costs $ 200,000
Fixed mfg. costs
$ 200,000
$ 50,000
$ 50,000
$
Irwin/McGraw-Hill
$
-
150,000
$ 150,000
Total
$ 250,000
150,000
$ 400,000
$ 250,000
150,000
$ 400,000
© The McGraw-Hill Companies, Inc., 2000
Reconciliation
We can reconcile the difference between
absorption and variable income as follows:
Variable costing net income
Add: Fixed mfg. overhead costs
deferred in inventory
(5,000 units × $6 per unit)
Absorption costing net income
$
90,000
30,000
$ 120,000
Fixed mfg. overhead
$150,000
=
= $6.00 per unit
Units produced
25,000
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
Extending the Example
Let’s look at the
second year
of operations
for Harvey
Company.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
Harvey Co. Year 2
In its second year of operations, Harvey Co. started with an
inventory of 5,000 units, produced 25,000 units and sold
30,000 units.
Number of units produced annually
Variable costs per unit:
Direct materials, direct labor
variable mfg. overhead
Selling & administrative
expenses
Fixed costs per year:
Manufacturing overhead
Selling & administrative
expenses
Irwin/McGraw-Hill
25,000
$
10
$
3
$ 150,000
$ 100,000
© The McGraw-Hill Companies, Inc., 2000
Harvey Co. Year 2
Unit product cost is determined as follows:
Direct materials, direct labor,
and variable mfg. overhead
Fixed mfg. overhead
($150,000 ÷ 25,000 units)
Unit product cost
Absorption
Costing
Variable
Costing
$
10
$
10
$
6
6
$
10
No change in Harvey’s
cost structure.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
Harvey Co. Year 2
Now let’s look at Harvey’s income statement
assuming absorption costing is used.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
Harvey Co. Year 2
Absorption Costing
Sales (30,000 × $30)
Less cost of goods sold:
Beg. inventory (5,000 × $16)
Add COGM (25,000 × $16)
Goods available for sale
Ending inventory
Gross margin
Less selling & admin. exp.
Variable (30,000 × $3)
Fixed
Net income
$ 900,000
$ 80,000
400,000
480,000
-
$ 90,000
100,000
480,000
420,000
190,000
$ 230,000
These are the 25,000 units
produced in the current period.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
Harvey Co. Year 2
Next, we’ll look at Harvey’s income statement
assuming
is used.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
Harvey Co. Year 2
Variable
costs
only.
Variable Costing
Sales (30,000 × $30)
Less variable expenses:
Beg. inventory (5,000 × $10)
$ 50,000
Add COGM (25,000 × $10)
250,000
Goods available for sale
300,000
Ending inventory
Variable cost of goods sold
300,000
Variable selling & administrative
expenses (30,000 × $3)
90,000
Contribution margin
Less fixed expenses:
Manufacturing overhead
$ 150,000
Selling & administrative expenses
100,000
Net income
Irwin/McGraw-Hill
$ 900,000
All fixed
manufacturing
overhead is
expensed.
390,000
510,000
250,000
$ 260,000
© The McGraw-Hill Companies, Inc., 2000
Summary
Income
Income Comparison
Comparison
Costing
Costing Method
Method
Absorption
Absorption
Variable
Variable
Irwin/McGraw-Hill
1st
1stPeriod
Period
$$120,000
120,000
90,000
90,000
2nd
2nd Period
Period
$$ 230,000
230,000
260,000
260,000
Total
Total
$$350,000
350,000
350,000
350,000
© The McGraw-Hill Companies, Inc., 2000
Summary
Year
Relation between
production
and sales
1st
year
Production > Sales
25,000 > 20,000
Production < Sales
2nd
25,000 < 30,000
year
Both
Production = Sales
years
50,000 = 50,000
combined
Irwin/McGraw-Hill
Effect
Relation between
on
variable and
iniventory
absorption income
Inventory
Absorption
increases by
>
5,000 units.
Variable
Inventory
Absorption
decreases
<
to zero.
Variable
Absorption
No change
=
Variable
© The McGraw-Hill Companies, Inc., 2000
Advantages of the Contribution
Approach
Consistent with
CVP analysis.
Management finds it
easy to understand.
Advantages
Impact of fixed
costs on profits
emphasized.
Irwin/McGraw-Hill
Net income is closer
to net cash flow.
Consistent with standard
costs and flexible budgeting.
Easier to estimate profitability
of products and segments.
Profit is not affected by
changes in inventories.
© The McGraw-Hill Companies, Inc., 2000
End of Chapter 7
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
Variable versus Absorption Costing
All manufacturing costs
must be assigned to
products to properly
match revenues and costs.
Absorption
Costing
Irwin/McGraw-Hill
Fixed costs are
not really the costs
of any particular
product.
Variable
Costing
© The McGraw-Hill Companies, Inc., 2000
Variable versus Absorption Costing
Depreciation, taxes,
insurance and salaries
are just as essential to
products as variable costs.
Absorption
Costing
Irwin/McGraw-Hill
These are capacity
costs and will be
incurred if nothing
is produced.
Variable
Costing
© The McGraw-Hill Companies, Inc., 2000
Variable versus Absorption Costing
I guess we won’t be
solving this controversy
today!
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
Impact of JIT Inventory Methods
In a JIT inventory system . . .
Production
tends to equal
sales . . .
So, the difference between variable and
absorption income tends to disappear.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
5
Variable Costing:
A Tool for Management
Overview of Absorption and
Variable Costing
Absorption
Costing
Product costs
Variable
Costing
Direct materials
Direct labor
Variable mfg. overhead
Product costs
Fixed mfg. overhead
Period costs
Period costs
Irwin/McGraw-Hill
Selling & admin. exp.
© The McGraw-Hill Companies, Inc., 2000
Penghitungan Biaya per Unit
Harvey Co. memproduksi satu
produk jadi, berikut ini informasi :
Number of units produced annually
Variable costs per unit:
Direct materials, direct labor,
and variable mfg. overhead
Selling & administrative expenses
$
$
Fixed costs per year:
Manufacturing overhead
Selling & administrative expenses
$ 150,000
$ 100,000
Irwin/McGraw-Hill
25,000
10
3
© The McGraw-Hill Companies, Inc., 2000
Penghitungan Biaya per Unit
Unit product cost is determined as follows:
Direct materials, direct labor,
and variable mfg. overhead
Fixed mfg. overhead
($150,000 ÷ 25,000 units)
Unit product cost
Absorption
Costing
Variable
Costing
$
10
$
10
$
6
16
$
10
Selling and administrative expenses are
always treated as period expenses and
deducted from revenue.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
Income Comparison of Absorption
and Variable Costing
Harvey Co. had no beginning inventory, produced
25,000 units and sold 20,000 units this year.
Absorption Costing
Sales (20,000 × $30)
Less cost of goods sold:
Beginning inventory
$
Add COGM (25,000 × $16)
400,000
Goods available for sale
400,000
Ending inventory (5,000 × $16)
80,000
Gross margin
Less selling & admin. exp.
Variable
Fixed
Net income
Irwin/McGraw-Hill
$ 600,000
320,000
280,000
© The McGraw-Hill Companies, Inc., 2000
Income Comparison of Absorption
and Variable Costing
Harvey Co. had no beginning inventory, produced
25,000 units and sold 20,000 units this year.
Absorption Costing
Sales (20,000 × $30)
Less cost of goods sold:
Beginning inventory
$
Add COGM (25,000 × $16)
400,000
Goods available for sale
400,000
Ending inventory (5,000 × $16)
80,000
Gross margin
Less selling & admin. exp.
Variable (20,000 × $3)
$ 60,000
Fixed
100,000
Net income
Irwin/McGraw-Hill
$ 600,000
320,000
280,000
160,000
$ 120,000
© The McGraw-Hill Companies, Inc., 2000
Income Comparison of Absorption
and Variable Costing
Now let’s look at variable costing by Harvey Co.
Variable
costs
only.
Variable Costing
Sales (20,000 × $30)
Less variable expenses:
Beginning inventory
$
Add COGM (25,000 × $10)
250,000
Goods available for sale
250,000
Ending inventory (5,000 × $10)
50,000
Variable cost of goods sold
200,000
Variable selling & administrative
expenses (20,000 × $3)
60,000
Contribution margin
Less fixed expenses:
Manufacturing overhead
$ 150,000
Selling & administrative expenses 100,000
Net income
Irwin/McGraw-Hill
$ 600,000
All fixed
manufacturing
overhead is
expensed.
260,000
340,000
250,000
$ 90,000
© The McGraw-Hill Companies, Inc., 2000
Income Comparison of Absorption
and Variable Costing
Let’s compare the methods.
Cost of
Goods
Sold
Ending
Inventory
Absorption costing
Variable mfg. costs $ 200,000
Fixed mfg. costs
120,000
$ 320,000
$ 50,000
30,000
$ 80,000
Variable costing
Variable mfg. costs $ 200,000
Fixed mfg. costs
$ 200,000
$ 50,000
$ 50,000
Irwin/McGraw-Hill
Period
Expense
Total
© The McGraw-Hill Companies, Inc., 2000
Income Comparison of Absorption
and Variable Costing
Let’s compare the methods.
Cost of
Goods
Sold
Ending
Inventory
Period
Expense
Absorption costing
Variable mfg. costs $ 200,000
Fixed mfg. costs
120,000
$ 320,000
$ 50,000
30,000
$ 80,000
$
Variable costing
Variable mfg. costs $ 200,000
Fixed mfg. costs
$ 200,000
$ 50,000
$ 50,000
$
Irwin/McGraw-Hill
$
-
150,000
$ 150,000
Total
$ 250,000
150,000
$ 400,000
$ 250,000
150,000
$ 400,000
© The McGraw-Hill Companies, Inc., 2000
Reconciliation
We can reconcile the difference between
absorption and variable income as follows:
Variable costing net income
Add: Fixed mfg. overhead costs
deferred in inventory
(5,000 units × $6 per unit)
Absorption costing net income
$
90,000
30,000
$ 120,000
Fixed mfg. overhead
$150,000
=
= $6.00 per unit
Units produced
25,000
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
Extending the Example
Let’s look at the
second year
of operations
for Harvey
Company.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
Harvey Co. Year 2
In its second year of operations, Harvey Co. started with an
inventory of 5,000 units, produced 25,000 units and sold
30,000 units.
Number of units produced annually
Variable costs per unit:
Direct materials, direct labor
variable mfg. overhead
Selling & administrative
expenses
Fixed costs per year:
Manufacturing overhead
Selling & administrative
expenses
Irwin/McGraw-Hill
25,000
$
10
$
3
$ 150,000
$ 100,000
© The McGraw-Hill Companies, Inc., 2000
Harvey Co. Year 2
Unit product cost is determined as follows:
Direct materials, direct labor,
and variable mfg. overhead
Fixed mfg. overhead
($150,000 ÷ 25,000 units)
Unit product cost
Absorption
Costing
Variable
Costing
$
10
$
10
$
6
6
$
10
No change in Harvey’s
cost structure.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
Harvey Co. Year 2
Now let’s look at Harvey’s income statement
assuming absorption costing is used.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
Harvey Co. Year 2
Absorption Costing
Sales (30,000 × $30)
Less cost of goods sold:
Beg. inventory (5,000 × $16)
Add COGM (25,000 × $16)
Goods available for sale
Ending inventory
Gross margin
Less selling & admin. exp.
Variable (30,000 × $3)
Fixed
Net income
$ 900,000
$ 80,000
400,000
480,000
-
$ 90,000
100,000
480,000
420,000
190,000
$ 230,000
These are the 25,000 units
produced in the current period.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
Harvey Co. Year 2
Next, we’ll look at Harvey’s income statement
assuming
is used.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
Harvey Co. Year 2
Variable
costs
only.
Variable Costing
Sales (30,000 × $30)
Less variable expenses:
Beg. inventory (5,000 × $10)
$ 50,000
Add COGM (25,000 × $10)
250,000
Goods available for sale
300,000
Ending inventory
Variable cost of goods sold
300,000
Variable selling & administrative
expenses (30,000 × $3)
90,000
Contribution margin
Less fixed expenses:
Manufacturing overhead
$ 150,000
Selling & administrative expenses
100,000
Net income
Irwin/McGraw-Hill
$ 900,000
All fixed
manufacturing
overhead is
expensed.
390,000
510,000
250,000
$ 260,000
© The McGraw-Hill Companies, Inc., 2000
Summary
Income
Income Comparison
Comparison
Costing
Costing Method
Method
Absorption
Absorption
Variable
Variable
Irwin/McGraw-Hill
1st
1stPeriod
Period
$$120,000
120,000
90,000
90,000
2nd
2nd Period
Period
$$ 230,000
230,000
260,000
260,000
Total
Total
$$350,000
350,000
350,000
350,000
© The McGraw-Hill Companies, Inc., 2000
Summary
Year
Relation between
production
and sales
1st
year
Production > Sales
25,000 > 20,000
Production < Sales
2nd
25,000 < 30,000
year
Both
Production = Sales
years
50,000 = 50,000
combined
Irwin/McGraw-Hill
Effect
Relation between
on
variable and
iniventory
absorption income
Inventory
Absorption
increases by
>
5,000 units.
Variable
Inventory
Absorption
decreases
<
to zero.
Variable
Absorption
No change
=
Variable
© The McGraw-Hill Companies, Inc., 2000
Advantages of the Contribution
Approach
Consistent with
CVP analysis.
Management finds it
easy to understand.
Advantages
Impact of fixed
costs on profits
emphasized.
Irwin/McGraw-Hill
Net income is closer
to net cash flow.
Consistent with standard
costs and flexible budgeting.
Easier to estimate profitability
of products and segments.
Profit is not affected by
changes in inventories.
© The McGraw-Hill Companies, Inc., 2000
End of Chapter 7
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
Variable versus Absorption Costing
All manufacturing costs
must be assigned to
products to properly
match revenues and costs.
Absorption
Costing
Irwin/McGraw-Hill
Fixed costs are
not really the costs
of any particular
product.
Variable
Costing
© The McGraw-Hill Companies, Inc., 2000
Variable versus Absorption Costing
Depreciation, taxes,
insurance and salaries
are just as essential to
products as variable costs.
Absorption
Costing
Irwin/McGraw-Hill
These are capacity
costs and will be
incurred if nothing
is produced.
Variable
Costing
© The McGraw-Hill Companies, Inc., 2000
Variable versus Absorption Costing
I guess we won’t be
solving this controversy
today!
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
Impact of JIT Inventory Methods
In a JIT inventory system . . .
Production
tends to equal
sales . . .
So, the difference between variable and
absorption income tends to disappear.
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000