-Fixed Manufacturing Costs are not divorced from production. They are very significant
especially in the modern automated industry. Thus, they should be included in the cost of
production and consequently in stock valuation.
- Where production is constant but sales fluctuate (which is what happens in real business life),
the net profit does not fluctuate as significantly as in marginal costing.
- Where stock building or piling is necessary part of operations, (for example, in timber
seasoning) inclusion of fixed costs in stock valuation is necessary and desirable for statements
to show a true and fair view. Otherwise, a series of fictitious losses will be shown in earlier
periods, only to be offset eventually by excessive profits when the goods are sold.
- Calculating the total costs of producing a good makes a firm to set a selling price that is NOT
below total cost. Calculating marginal cost and contribution may make a firm to set prices
that are below total cost while still producing some contribution.
- Matching concepts advocates for absorption costing: Costs and revenues must be matched in
the period when revenue arises, and not when costs are incurred. SSAP (Stocks and Work in
Progress) advocates for the matching concept and recommends that stock valuations must
include production overheads incurred in the normal course of business even if not time
related.
marto answered the question on February 26, 2019 at 09:41
- Factors to consider in make -or - buy decisions(Solved)
Factors to consider in make -or - buy decisions
Date posted: February 26, 2019. Answers (1)
- What is the role of cost accounting in decision making(Solved)
What is the role of cost accounting in decision making.
Date posted: February 26, 2019. Answers (1)
- Factors influencing cost estimation method used by a manufacturing company(Solved)
Factors influencing cost estimation method used by a manufacturing company
Date posted: February 26, 2019. Answers (1)
- What are the features of process costing.(Solved)
What are the features of process costing.
Date posted: February 26, 2019. Answers (1)
- Give the functions of budgets.(Solved)
Give the functions of budgets.
Date posted: February 26, 2019. Answers (1)
- List the ways to improve cash management.(Solved)
List the ways to improve cash management.
Date posted: February 26, 2019. Answers (1)
- What are the causes of difference in cost and financial accounts(Solved)
What are the causes of difference in cost and financial accounts
Date posted: February 26, 2019. Answers (1)
- Give the problems in cost estimation.(Solved)
Give the problems in cost estimation.
Date posted: February 26, 2019. Answers (1)
- Give the Limitations of budgeting(Solved)
Give the Limitations of budgeting
Date posted: February 26, 2019. Answers (1)
- Give the causes of stock discrepancies.(Solved)
Give the causes of stock discrepancies.
Date posted: February 26, 2019. Answers (1)
- Give the factors considered in selecting overhead absorption rate(Solved)
Give the factors considered in selecting overhead absorption rate
Date posted: February 26, 2019. Answers (1)
- Give the definition of a cost centre and its application(Solved)
Give the definition of a cost centre and its application
Date posted: February 26, 2019. Answers (1)
- Give the causes of labour efficiency variance(Solved)
Give the causes of labour efficiency variance
Date posted: February 26, 2019. Answers (1)
- Give the causes of labour rate and efficiency variances(Solved)
Give the causes of labour rate and efficiency variances
Date posted: February 26, 2019. Answers (1)
- Give the disadvantages of overstocking:(Solved)
Give the disadvantages of overstocking:
Date posted: February 26, 2019. Answers (1)
- Distinguish between the following Incremental costs and Marginal costs,cost centres and object centres,job costing system and process costing system,relevant cost and relevant range,(Solved)
Distinguish between the following Incremental costs and Marginal costs,cost centres and object centres,job costing system and process costing system,relevant cost and relevant range,
Date posted: February 26, 2019. Answers (1)
- Give the assumptions of break-even analysis.(Solved)
Give the assumptions of break-even analysis.
Date posted: February 26, 2019. Answers (1)
- Give the requirements of an effective stock control system.(Solved)
Give the requirements of an effective stock control system.
Date posted: February 26, 2019. Answers (1)
- Give the benefits of a standard costing system.(Solved)
Give the benefits of a standard costing system.
Date posted: February 26, 2019. Answers (1)
- Give the classification of costs.(Solved)
Give the classification of costs.
Date posted: February 26, 2019. Answers (1)