Accounting Chapter 6 Notes
Accounting Chapter 6 Notes ACC 204
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This 2 page Class Notes was uploaded by Melanie Guerrero on Sunday April 24, 2016. The Class Notes belongs to ACC 204 at Pace University taught by James Hannon in Spring 2016. Since its upload, it has received 11 views. For similar materials see Managerial Accounting (20014) in Accounting at Pace University.
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Date Created: 04/24/16
Accounting Chapter 6 Notes Variable Costing and Absorption Costing • Under Variable costing – only those manufacturing costs that vary with output are treated as costs • Absorption costing treats all manufacturing costs as product costs, regardless of whether or they are variable or fixed Variable Costing Contribution Format Income Statement Absorption Costing Income Statement Enabling CVP Analysis • Requires that we break costs down into their fixed and variable components Traceable and Common Fixed Costs and the Segment Margin • Traceable fixed cost – a fixed cost that is incurred because of the existence of the segment [Ex: Salary of a product manager, maintenance cost, liability insurance] • Common fixed cost – fixed cost that supports the operations of more than one segment, but is not traceable in whole or in part to any one segment [Ex: Salary of CEO, cost of heating at a mall] • Segment margin – obtained by deducting the traceable fixed costs of a segment from the segment’s contribution margin Break-even Analysis Dollar Sales for company to break even = Traceable fixed expenses + common fixed expenses Overall CM Ratio Dollar sales for a segment to break even = Segment traceable fixed expenses Segment CM ratio
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