Variable costing charges only with manufacturing costs that are directly in volume. Only premium costs (direct materials and direct labor) and variable factory overhead costs are allocated to the stocks, to the processing, to the finished product, and to the cost of the products sold. Thus, these variable costs will cost the product, while fixed production costs are generally estimated in the current period. Costs of production, such as depreciation, insurance and taxes, which are time dependent rather than production, are not part of the cost of the product. Furthermore, factory supervisors and office employees of wages and certain factory employees, such as maintenance staff and guards, are also excluded, which are a periodic cost rather than a product cost.
Direct cost accounting focuses on your product and costs. This interest moves in two libraries: (1) the internal use of the fixed variable cost relationship and the concept of the contribution key; and (2) foreign uses, which include inventory valuation, income determination and financial reporting. Internal uses deal with direct cost estimation in profit planning, product pricing, other stages of decision making, and cost control. Managing management, including marketing executives, production executives, and cost analysts, usually supervised and analyzed direct costs. Fixed costs on unit costs are usually different. On the other hand, the direct unit costs and the unit-linked contribution difference remain constant for the different volumes of production and sales.
Contribution key or marginal income is the deduction of all variable costs from sales revenue. In the case of direct reimbursement, the income per unit is not counted; only revenue from all sales of all products is determined by deducting the total fixed cost from the contribution key.
Source by sbobet