As an EEC corporate business financial analyst, you must have an expert understanding of the various...

Question

As an EEC corporate business financial analyst, you must have an expert understanding of the various costing methods. Within your groups, divide the costing concepts among the individual team members to analyze and become an expert in at least 1 costing concept within your group. Then, write a paper to include the following:

The definition of the concept
How and when the concept could be used by EEC
How the application of the concept differs from the other concepts
Its advantages and disadvantages as they relate to EEC

Choose from the following costing concepts

Variable Costing

3 page with reference APA Format

Robert · Accepted Answer

Variable Costing 
Variable Costing is a managerial cost accounting concept. Variable Costing includes 
those costs that change in total with changes in production level. Under variable costing, fixed 
manufacturing overheads are not included in the product cost. Under variable costing all the 
variable costs i.e. (direct material, direct labor, indirect labor, variable manufacturing overhead, 
variable selling and admin overhead) are deducted from the sales revenue and then the resultant 
figure is termed as contribution margin and all the fixed costs are then deducted from the 
contribution margin to derive at net profit. 
Under variable costing, those costs are considered as product costs which vary directly with the 
output. The components of product cost under variable costing include:  
 Direct Materials 
 Labor Cost 
 Variable Manufacturing (Factory) Overheads 
 Variable Selling & Administration Overheads 
Fixed Manufacturing Costs and Fixed Selling & Administration Costs are not treated as 
product costs under variable costing method. Rather, the fixed manufacturing costs are treated as 
Period Costs and recorded in the period incurred. 
Advantages & Disadvantages of Variable Costing 
Variable costing is also applicable to service companies.  Service companies do not have 
inventory but an eye on variable costs is still useful for managerial decisions.

As an EEC corporate business financial analyst, you must have an expert understanding of the various costing methods. Within your groups, divide the costing concepts among the individual team members...

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