Wk 4 Discussion

Noreen, E., Brewer, P., & Garrison, R. (2016).

Managerial accounting for managers. (4th ed.).

McGraw-Hill

ISBN:  9781308886718

Review

· Video:  Absorption Costing vs. Variable Costing

· Variable Costing

· Absorption Costing

W4 Discussion #1

This week, we learned that there are two different ways of reporting the contribution margins – variable and absorption costing. The authors made a point that one method is more useful for internal purposes, and the other is more useful for external reporting.

Let’s think about a company that produces dinner ware (plates, bowls, cups and saucers, for example). Some of the dinner ware is intended for daily use (stoneware that is dishwasher and microwave safe), and other dinner ware is for special occasion (fine china or bone china, with gold trim that cannot go in the microwave!) Daily use dinnerware is less expensive than special occasion dinnerware. Imagine that there is consistent demand year-round for the “daily use” dinnerware, but there are seasonal spikes in demand for the “special occasion” dinnerware (i.e. wedding season and the holiday season). Additionally, gold is an important component of special use dinner ware, yet the price of gold varies.

Explain how fixed manufacturing overhead costs are shifted from one period to another under absorption costing. Would you recommend absorption costing for the daily dinner ware, the special occasion dinner ware, or both?

What arguments are there in favor of treating fixed manufacturing overhead costs as product costs? As period costs?

Under absorption costing, how is it possible to increase net operating income without increasing sales? Explain using the dinner ware example.

W4 Discussion #2

This week, you were asked to access a number of videos and websites. These are great resources to help you learn the materials this week. Consider what type of resource you find most helpful in learning new materials (videos, examples, text, etc). Then consider which topic you struggled with the most this week. Complete an online search for a new resource that will help you with that topic. For example, if you learn beset from videos and you struggled with the topic double entry accounting, then complete an online search for “double entry accounting videos”. If you learn best by examples, search for “double entry accounting examples”. Select one of the items you find in your search that you found particularly helpful in learning the topic you struggled with the most and post a summary of the resource and a link to the resource.

Cite and summarize the resources using APA.