inventoriable cost using variable costing
Direct materials + direct manufacturing labor + variable manufacturing costs
Inventoriable costs using variable costing is a method of tracking the costs of goods sold and determining the value of inventory on hand. This method only considers variable costs as inventoriable costs, which means that any fixed costs are expensed in the period they are incurred. The cost of goods sold is determined by adding together the direct materials, direct labor, and variable overhead costs associated with producing the products sold.
Variable costs are costs that change with the level of production, including things like materials, labor, and utilities. In contrast, fixed costs remain constant regardless of production levels, such as rent and depreciation.
By only considering variable costs as inventoriable, variable costing provides a clearer view of the costs directly involved in producing the product. This can be useful for decision-making, as it allows managers to see the true cost of producing additional units and make more informed pricing decisions.
Overall, inventoriable costs using variable costing can provide a more accurate picture of a company’s true production costs and profitability. However, it is important to note that this method does not comply with generally accepted accounting principles (GAAP) and is not acceptable for external financial reporting purposes.
More Answers:
How to Calculate Contribution Margin: A Step-by-Step Guide with Example and FormulaComparing Absorption and Variable Cost Methods: Debunking Myths and Clarifying Differences
How to Calculate Inventoriable Cost Using Absorption Costing: Including all Direct and Indirect Costs in Production Costs.