Direct costing

1
Chapter 10

• Direct costing

2
Absorption costing
Absorption costing Direct materials Direct
labour Variable factory overhead Fixed
factoryoverheadVariable marketing/administratio
n Fixed marketing/administration
Product costs
Manufacturing costs
Period costs
Non- manufacturing expense
3
Direct costing
Direct costing Direct materials Direct
labour Variable factory overhead Fixed
factoryoverheadVariable marketing/administratio
n Fixed marketing/administration
Product costs
Manufacturing costs
Period costs
Non- manufacturing expense
4
Inventory valuation

• Using direct costing
• Using absorption costing

5
Revenue statements with actual factory overhead
Using absorption costing
6
Reconciliation of reported profits
Absorption costing
7
Reconciliation of reported profits
Direct costing
8
Reporting variable marketing and administrative
expensedirect costing
9
Job costing

• Absorption costing
• Direct costing

See Chapter 7 for Job costing for manufacturers
10
Australian Accounting StandardAASB 1019
The Measurement and Presentation of Inventories
in the Context of the Historical Cost System
11
Australian Tax Office requirements

• Inventories are to be valued used absorption
  costing

12
Chapter 11
Discusses

• Differential costing
• and
• linear programming