Income Inflation: Absorption Costing Vs. Variable (Notes) (Case Study)

Case description The main theme of this case is not the sales when using GAAP based absorption cost calculation but the revenue when compared to the variable cost calculation for internal use when generating more inventory It relates to expansion opportunities. Secondary considerations include differences between financial accounting and management accounting, administrators, certified public accountants, ethical responsibilities of certified public accountants, organizational culture of the organization, fixed and variable costs, inaccuracies reported within one year There are many. Other Annual Financial Statements This situation adapts to three different difficulty levels, Level 2 suitable for 2nd Annual Accounting Principles, Level 3 Suitable for Primary Cost Accounting, and Level 5 Suitable for Graduate Level Management Accounting I can do it. This case is designed to teach 30 minutes lesson time and is expected to require 1 hour external preparation.

Absorption cost profit and loss statement is offered at three different sales levels, production has not changed. This case requires that students use this information to compile variable cost income statements at the same level, assuming that production is the same. In this case, students are also required to discriminate between fixed and variable costs, discuss ethical choices and discuss "advanced keynote lectures". External accounting principles (GAAP) apply only to external financial accounting and reporting. There are no essential requirements for preserving internal financial records of your company. Therefore, each company can specify how to execute an intercompany transaction. Of course, companies can simply opt for GAAP internally and choose to create additional reports and analyzes to support decision-making and other tasks.

The main theme of this case is not to sell when using GAAP based absorption cost accounting, but to solve the problem of expansion of revenue when compared with variable cost calculation for internal use when generating more inventory Regarding opportunities. Secondary considerations include differences between financial accounting and management accounting, administrators, certified public accountants, ethical responsibilities of certified public accountants, organizational culture of the organization, fixed and variable costs, inaccuracies reported within one year There are many. Other Annual Financial Statements This situation adapts to three different difficulty levels, Level 2 suitable for 2nd Annual Accounting Principles, Level 3 Suitable for Primary Cost Accounting, and Level 5 Suitable for Graduate Level Management Accounting I can do it. This case is designed to teach 30 minutes lesson time and is expected to require 1 hour external preparation.