Absorption Costing vs. Variable Costing

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This video explains the difference between Absorption Cost and Variable Costing in the context of managerial accounting. The key functional difference between these two methods is the way in which fixed overhead is classified, and the video provides an example to illustrate how this difference leads to substantial discrepancies in the calculation of product costs, cost of goods sold, and profitability. The video then summarizes the benefits and drawbacks of Absorption Costing and Variable Costing.
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Опубликовано:

29 сен 2024

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Комментарии : 106

@anitachitnis1218 9 лет назад

These videos are literally the only reason I passed my managerial accounting course. Thank you!!

@Edspira 9 лет назад

Anita Chitnis Congratulations on passing your course!

@MattLeitholt 7 лет назад

Dead accurate. If only we could get a degree from passing a test related to these videos for free. :D

@boitumelomokotong4861 2 года назад

8 years later, they are the reason why I my management accounting marks increased drastically 🔥👏.

@ntcuong01ct1 Год назад

Dear Friends, I have a question: 1/ In the absorption costing system, I think the difference between Absorbed cost and full costing. Absored cost = direct material + direct labor + variable overhead manufacturing + fixed overhead manufacturing for a product or a brand or a product line. full cost= Absored cost + all corporate-related expenses for all product or all brand or all product line. Could you help?. Thank you.

@bryanquijano8850 8 месяцев назад

Hello. The difference of absorption and variable costing is how they treat the ‘fixed overhead’. In absorption costing it is a product cost but in variable costing FxOH is considered as period cost. I have RU-vid lecture videos on this topic. See link: Management Advisory Services Discussions ru-vid.com/group/PL-2o1HBAK0k60uT16flBEZEU8AI-hUNWI

@MrYoshi956 9 лет назад

I hate accounting

@JunaidKhan-gf5yq 7 лет назад

it sucks..

@sethjolitz7757 7 лет назад

Raudel Gonzalez Accounting is awesome

@annavasylyeva7286 7 лет назад

indeed.

@hillarinewell6671 6 лет назад

Raudel Gonzalez lmao thats funny as im watching the video this is the first comment i see!!

@leaderofteam7487 6 лет назад

LOL

@traviscarroll5762 6 лет назад

genuine question: do people really enjoy this stuff? if so, how? I need to understand and emulate the mindset otherwise I'm gonna blow my brains out this semester

@muhammadairlanggarahmadi7301 5 лет назад

in my opinion, what's makes me more enjoying this stuff is because it can elevate my career. I saw Starbucks with a different POV and it might help your business/job too man and that's the art of accounting

@GasaMfundo 4 года назад

Lol! Some people were created to absorb and understand this module.....other it's just to get an idea and move forward

@FullMoonHatch 4 года назад

This helps the world go round.

@TextbookBoxingGB 3 года назад

Personally I don't really enjoy learning the actual rules etc, but I find looking through accounts to work out how well a business is doing at least mildly interesting. It's worth saying that this guy makes this process as about as least painful and actually clear as it can be

@BeMyVforever 3 года назад

This question/statement will last forever LOL. I'm feeling the pain right now

@kestonluke6439 9 лет назад

Far superior to my professor.

@Edspira 9 лет назад

Thank you!

@alyssacraig5276 9 лет назад

+Keston Luke I second that!

@tomwidman5716 4 года назад

Anyone notice how these balloons are selling for $80,000 each?? I'm in the wrong business..

@jeremybrewer7934 5 лет назад

You sort of sound like John C. Reilly...so I'm just pretending wreck-it Ralph is teaching me accounting. It helps. Seriously, though, your videos have helped me more than I can express. Thanks for doing what you do!

@Edspira 5 лет назад

Funny. I have gotten this John C. Reilly comment a few times. We are both from Chicago, so it must be the accent. Thanks for your kind words, and best of luck with your studies!

@ItsRauha 3 года назад

Its so True😂😂😂😂😊

@The1AndOnlyDannyBro 9 лет назад

The first minute of the video helped me significantly - I always wondered how the difference between variable costing and absorption costing would look in an accounting perspective, and this made it as clear as day. Much appreciated.

@yuniorgalardy2781 8 лет назад

Thanks for posting this video. Please keep up the good work and know that you are helping lots of people understand these topics.

@Edspira 8 лет назад

Thank you for the kind words!

@angeladangela500 2 года назад

Your videos are still relevant nearly a decade later 🙂 Thank you!

@Edspira 2 года назад

No problem! I'm glad you found the videos useful!

@benjaunceyyy 6 лет назад

You explained this much better than my teacher, my teacher argues with people when they have a question and it's as if when he's going through it again he doesn't even know what he's talking about he takes like 10 second pauses.. Smh I expect more for paying £9,000 a year

@Edspira 6 лет назад

You made me smile with this one. Best of luck to you!

@benjaunceyyy 6 лет назад

Thanks, my exam was yesterday and I'm happy that I felt confident in answering absorption costing method questions! But I have most probably failed as I had no idea about balance sheets. Guess I'll be re-sitting this one :/

@rubbyomariii3419 4 года назад

Same situation, I know how you feel!

@MaisonVendetta 7 лет назад

How did you get 43,000 Q1 and 40,000 Q2 for absorption costing? Shouldn't you add DM, DL, VOH and FOH, for this?

@jscca3536 6 лет назад

you have to divide the FOH/period on the units produced before you add it to DM, DL, VOH

@cl8wnm5n 4 года назад

@@jscca3536 This

@thecalmguy_vin 2 года назад

The tone you speak, the clear voice makes me much confident of the content you teach. thank you very much for your valuable work and appreciate it very much. I have watched so many videos with same content but nothing made me sense than this. I subscribed your channel.

@Edspira 2 года назад

Thank you for such kind words. I put a lot of effort into creating the videos so it makes me very happy to hear that you are enjoying the content!

@dmoskovitz5310 5 лет назад

is variable costing the same as marginal costing?

@matsoncna 5 лет назад

These Videos are the only reason why i am passing my accounting class.

@Greenwood9807 4 года назад

Thank you for these videos. They are simple and clear, it's way better than reading through my text book!!!

@teacherteacher1686 7 лет назад

4 people don't like hot air balloons

@sarthakkandanala1688 11 месяцев назад

All of these videos are so helpful and teach me days worth of lecture materials in such little time. I understand it so much better and easier too. Thank you so much for providing this, I just discovered your channel yesterday and it’s already made such a positive impact for me

@friedandahafahaingura6202 6 лет назад

I did not do accounting at school and my assignments are keeling me. no clue at all

@neomarlog5406 Год назад

studying for CPA and this helped so much! havent done managerial accounting since college and this was a perfect concise explanation. was struggling to understand differences between both methods but this helps understand better! will have to use your other videos to aid my CPA studying

@Edspira Год назад

Glad it was helpful!

@perrinpartee557 Месяц назад

Absorption accounting is stupid. lol sorry but if I’m running a business it’s useless

@rosiifinau8945 6 месяцев назад

How did we get the $40000 for Q2 in absorption costing , someone explain pls

@mokarimi414 3 года назад

God bless you, these videos are very helpful

@guruprasad1222 8 лет назад

I wish I cud have, you as my professor.Thank you so much

@Edspira 8 лет назад

+Guru Prasad Thank you for the kind words!

@rubbyomari5354 4 года назад

@@Edspira I wish that too 😍 you are the best, really thank you 💟

@stephencharles9653 2 года назад

this guy is the best lol

@Edspira 2 года назад

😀

@Aliciathompson49 5 лет назад

Watching your videos from the UK after you helped me so much with financial performance when I had to re-sit it. Now re-watching to help me pass my final exam which is a bit of everything! I forgot how good these are :) Thank you so much!

@mariuslastname7563 Год назад

I learned how little i learned all semester real quick

@andrespinargote7096 7 лет назад

Question, in the previous video you referred to Gross margin as sales - COGS, now you refer to Net income as sales - COGS. Is Gross margin the same as Net income? thank you in advance and great video!

@Edspira 7 лет назад

Gross margin is different than net income. Gross margin is sales less COGS (as you stated above). When calculating net income, you would also subtract out Selling, General, and Administrative Expenses and other misc expenses. In this example, at 4:42 I stated that we were going to ignore SG&A just to make things simpler. If you'd like to review how net income is calculated, please see this video: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE--__bUSEls5Y.html Thanks for the question!

@1nn88 6 лет назад

I wish I had seen this much earlier, Wasted money on useless exam packs...

@Edspira 6 лет назад

I've been there... they charge students a fortune for material that is often of questionable quality!

@ntcuong01ct1 4 года назад

Dear Friends, I have a question: I want to setup Absorption costing of a product in year 2020. Next, I want to compare actual costing and Absorption costing in this product by month, year. How do I setup?.

@andrewkoppert1174 8 лет назад

You guys are a great help! Thanks for helping me understand. Greetings from Holland.

@Edspira 8 лет назад

no problem!

@nourayman5173 8 лет назад

thanks for your great explanation :D you sound like prof. Charles Mathews

@Edspira 8 лет назад

I'm currently working on my PhD, and teach as an adjunct lecturer. I'm glad you enjoyed the video!

@nourayman5173 8 лет назад

Good luck with your PhD, i know you will be a great professor :DD

@aniketchatterjee77 7 лет назад

Superb explanation, concise and clear!

@Edspira 7 лет назад

Thanks!

@firzanahfakhri2336 10 месяцев назад

i hope you can open the subtitles. + these videos r helping me a lot! thanks

@bryanquijano8850 8 месяцев назад

Hello! I also have my lecture videos for Variable Costing. Hopefully I can help you too! See link: Management Advisory Services Discussions ru-vid.com/group/PL-2o1HBAK0k60uT16flBEZEU8AI-hUNWI

@heasheads1339 8 лет назад

Thank u for your help me. from today I have more information about absorption costing and variable costing.

@muhammadwaseemali9486 3 года назад

Sir where is marginal accounting?

@AbuMojtaba90 8 лет назад

Usufull,, thanks from Bahrain ;)

@Edspira 8 лет назад

+Sayed Mohd Thank you!

@Nkindinkindi 7 лет назад

Too much thanks

@Edumeling 6 лет назад

Is the variable costing the same as the direct costing?

@rubbyomari5354 4 года назад

You are a life saver ❤️❤️ thank you ❤️❤️

@hughdamian1188 6 лет назад

COGS = beg inventory + production - end inventory, what is happening to the other 10 balloons, shouldnt they be included in the in Q2 COGS since we didnt sell them?

@cl8wnm5n 4 года назад

No because they weren’t sold. We only include the units that were sold, not necessarily produced.

@monerox7211 4 года назад

When he says variable costing , he is referring to marginal costing ?

@huzaifa1083 4 года назад

Yes

@shereseleander7863 7 лет назад

Thank you! I'm very grateful for these videos.

@TheGeakemasri 8 лет назад

thanks from egypt, this helped me alot!

@paulissifu8439 4 года назад

Please You keep mentioning SGNA or period cost. Please can you share the link to that tutorial video if you have?

@Edspira 4 года назад

ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-5RcNPp1_stU.html

@Edspira 4 года назад

A period cost is a cost that is expensed when occurred (in contrast to a product cost, which is expensed when the inventory is sold through Cost of Goods Sold). SG&A stands for "Selling, General, and Administrative" expense; SG&A is a period cost

@mbilalmiraki5863 5 лет назад

thank you

@vireshramcharanvr 7 лет назад

Thank you very much!

@Edumeling 6 лет назад

Is the variable costing the same as the direct costing?

@romeshguptacpimcscpscor-p6853 8 лет назад

Great explaination

@marioyappy8744 9 лет назад

Hi, great video about costing methods mate!!! By the way, i would like to ask you some question. In situation when units produced > units sold, would you recommend absorption or variable-costing for evaluating management performance? And how if units produced < units sold. Thank you very much. hope u can reply asap.