B Com Exam > B Com Videos > Cost Accounting > Absorption Costing Example - Overheads, Cost Accounting
Absorption Costing Example - Overheads, Cost Accounting Video Lecture | Cost Accounting - B Com
|
106 videos|173 docs|18 tests
|
FAQs on Absorption Costing Example - Overheads, Cost Accounting Video Lecture - Cost Accounting - B Com
| 1. What is absorption costing and how does it differ from other costing methods? |  |
Ans. Absorption costing is a costing method used in managerial accounting, where all the costs (both variable and fixed) incurred in the production of goods or services are allocated to the products. This method includes direct costs such as direct materials and direct labor, as well as indirect costs or overheads such as rent, utilities, and depreciation. In contrast, other costing methods such as variable costing only include variable costs in the product cost calculation, excluding fixed overhead costs.
| 2. How are overhead costs allocated in absorption costing? | |
Ans. In absorption costing, overhead costs are allocated to products based on a predetermined overhead rate. This rate is calculated by dividing the total estimated overhead costs for a specific period by the estimated allocation base, such as direct labor hours or machine hours. The predetermined overhead rate is then multiplied by the actual allocation base used by each product to determine the allocated overhead cost.
| 3. What are the advantages of using absorption costing? | |
Ans. Absorption costing offers several advantages. Firstly, it provides a more accurate representation of the total cost of producing a product by including both variable and fixed costs. This helps in making pricing decisions, determining profitability, and setting appropriate selling prices. Secondly, absorption costing is required for external financial reporting purposes, as it follows the generally accepted accounting principles (GAAP). Lastly, absorption costing helps in determining the full cost of inventory, which is important for financial statements and tax calculations.
| 4. Can absorption costing lead to over or under-absorption of overhead costs? | |
Ans. Yes, absorption costing can lead to over or under-absorption of overhead costs. Over-absorption occurs when the actual overhead costs incurred are less than the allocated overhead costs. This can happen if the actual allocation base used is lower than the estimated allocation base, resulting in higher allocated overhead costs. Conversely, under-absorption occurs when the actual overhead costs are higher than the allocated overhead costs. This can happen if the actual allocation base used is higher than the estimated allocation base, resulting in lower allocated overhead costs.
| 5. How does absorption costing affect inventory valuation and profit calculation? | |
Ans. Absorption costing affects inventory valuation and profit calculation by including fixed overhead costs in the cost of inventory. This means that a portion of the fixed overhead costs is allocated to each unit of inventory, increasing the carrying value of inventory on the balance sheet. When the inventory is sold, the allocated overhead costs are recognized as an expense in the income statement, reducing the profit. Therefore, absorption costing generally results in higher inventory values and lower profits compared to variable costing, where fixed overhead costs are treated as period costs and not included in inventory valuation.
Related Exams
About this Video
|
4.69/5 Rating |
|
Dec 23, 2024 Last updated |
Video Description: Absorption Costing Example - Overheads, Cost Accounting for B Com 2024 is part of Cost Accounting preparation.
The notes and questions for Absorption Costing Example - Overheads, Cost Accounting have been prepared according to the B Com exam syllabus.
Information about Absorption Costing Example - Overheads, Cost Accounting covers all important topics for B Com 2024 Exam.
Find important definitions, questions, notes, meanings, examples, exercises and tests below for Absorption Costing Example - Overheads, Cost Accounting.
Introduction of Absorption Costing Example - Overheads, Cost Accounting in English is available as part of our Cost Accounting for B Com & Absorption Costing Example - Overheads, Cost Accounting in
Hindi for Cost Accounting course. Download more important topics related with notes, lectures and mock test series for
B Com Exam by signing up for free.
Description
Video Lecture & Questions for Absorption Costing Example - Overheads, Cost Accounting Video Lecture | Cost Accounting - B Com - B Com full syllabus preparation | Free video for B Com exam to prepare for Cost Accounting.
Information about Absorption Costing Example - Overheads, Cost Accounting
Here you can find the meaning of Absorption Costing Example - Overheads, Cost Accounting defined & explained in the simplest way possible.
Besides explaining types of Absorption Costing Example - Overheads, Cost Accounting theory, EduRev gives you an ample number of questions to practice Absorption Costing Example - Overheads, Cost Accounting tests,
examples and also practice B Com tests.
|
106 videos|173 docs|18 tests
|
|
Explore Courses for B Com exam
|
|
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
Related Searches
Absorption Costing Example - Overheads
,Important questions
,practice quizzes
,Sample Paper
,mock tests for examination
,Cost Accounting Video Lecture | Cost Accounting - B Com
,study material
,Cost Accounting Video Lecture | Cost Accounting - B Com
,video lectures
,Viva Questions
,shortcuts and tricks
,Semester Notes
,past year papers
,MCQs
,ppt
,Previous Year Questions with Solutions
,Objective type Questions
,Cost Accounting Video Lecture | Cost Accounting - B Com
,Exam
,Absorption Costing Example - Overheads
,Extra Questions
,Free
,Absorption Costing Example - Overheads
,Summary
;
Study Absorption Costing Example - Overheads, Cost Accounting on the App
Students of B Com can study Absorption Costing Example - Overheads, Cost Accounting alongwith tests & analysis from the EduRev app,
which will help them while preparing for their exam. Apart from the Absorption Costing Example - Overheads, Cost Accounting,
students can also utilize the EduRev App for other study materials such as previous year question papers, syllabus, important questions, etc.
The EduRev App will make your learning easier as you can access it from anywhere you want.
The content of Absorption Costing Example - Overheads, Cost Accounting is prepared as per the latest B Com syllabus.
|
© EduRev
|
Education Revolution
|
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup