Product and Period Costs

A business needs to separate period and product cost as product costs are included as part of the inventory until the product is sold, whereas period costs are treated as an expense in the income statement in the period in which they are incurred.

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Equivalent Units FIFO method

The equivalent units FIFO method is used in process costing to express partially completed units of product in terms of finished units.

The objective of using equivalent units is to be able to allocate production costs to completed and partially completed units.

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Equivalent Units of Production

The equivalent units of production method is used in process costing to express partially completed units of product in terms of finished units.

The objective of using equivalent units is to be able to allocate production costs to completed and partially completed units.

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Fixed Overhead Variance

In a standard costing accounting system, fixed manufacturing overhead has two main variances budget and volume. Fixed overheads are those costs which do not vary in response to the level of production output. To operate a standard costing system and allocate fixed overhead, the business must first decide on the basis of allocation, and calculate the standard fixed overhead allocation rate.

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Variable Overhead Variance

In a standard costing accounting system, variable manufacturing overhead has two main variances rate and efficiency. Variable overheads are those costs which vary in response to the level of production output but which cannot be attributed to individual units of production. To operate a standard costing system and allocate variable overhead, the business must first decide on the basis of allocation.

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