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 resource.
FOLLOW UP POSTS
As you review what your peers have posted, use your critical thinking skills to respond to their interpretations and conclusions. Seek clarification for points of interest to you.
Write at least 300 words
Post at least two replies to either peers or the instructor
Write at least 150 words per reply
For this week’s reading, I was confused on the difference between absorption costing and variable costing. I understood that the fixed overhead was the key difference, as in, absorption costing includes the fixed overhead as a product cost and variable costing the fixed overhead is a period cost. However, I had a difficult time following the example that was listed in the textbook and the explanation of the CVP analysis. This week, I found a YouTube video that explained the difference between the two, as well as a step-by-step example on how to calculate an income statement using a firm that produces hot air balloons. A good summary of the video follows along with the table used in the textbook. Table 5-5 showed the comparative income effects of absorption and variable costing. Units produced = units sold = no changes, units produced > units sold = inventories increase, and units produced < units sold = inventories decreased. This helped me out on the last problem that was listed in the other discussion question for this week. Additionally, the video also summarized the advantages and disadvantages of both of the methods. That portion of the video came in handy for the second part of the discussion question. The CVP was clear in the textbook of how to calculate, but the video was beneficial to find the information needed to plug into the formula using a different example. Highly recommend using this video for the upcoming assignment.
Edspira. (2014). Absorption Costing vs. Variable Costing. Retrieved May 20, 2019 from https://www.youtube.com/watch?v=ApRSgmnnEjI
Good Afternoon Class,
As the class continues, I feel as though there is definitely more and more additional research I have to complete to understand the key concepts from each section. For this week, I needed to find additional sources for understanding income statements using both absorption costing and variable costing, which includes the key differences between the two statements.
For income statements using absorption costing, the key take-away is that this style is required under generally accepted accounting principles. Additionally, a lot more is tacked under product cost, such as fixed manufacturing overhead, which results in the cost of goods sold being slightly different from the other method of income statements (Garcia, n.d.). The source I used also breaks down how the income statement should look, starting off with the gross sales for the period, followed by the cost of goods sold, and so on, all the way to the end where you get your net operating income.
Now we have the variable costing income statement. This is where all of the variable expenses are deducted from revenue, which results to a separately-stated contribution margin. This is where all fixed expenses are subtracted to bring us the net profit or loss for that period (Bragg, 2019). This source continues to explain some differences between the variable costing income statement and the normal income statement, to include; the gross margin being replaced by the contribution margin, along with some other aspects. Finally, it too provides information on how the variable costing income statement should look.
Between these two sources, I feel as though I was provided a better understanding between these two styles of income statements that we learned during this chapter’s reading. Even though for this week, I didn’t utilize a video source like normal, I have used both of these websites for previous accounting classes, and they provide amazing information on a lot of aspects.
Best of luck to everyone on their reading and assignments for this week.
Bragg, S. (2019, March 21). Variable costing income statement. Retrieved from https://www.accountingtools.com/articles/what-is-a-variable-costing-income-statement.html
Garcia, M. (n.d.). How to Prepare an Income Statement Under Absorption & Marginal Costing. Retrieved from https://smallbusiness.chron.com/prepare-income-statement-under-absorption-marginal-costing-80708.html