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Absorption Costing Example

This video provides an example of how to calculate a company's operating profit or loss when Absorption Costing is used in Managerial Accounting. To calculate operating profit or less with Absorption Costing, you subtract operating expenses from operating revenues. Fixed manufacturing overhead is treated as a product cost, which means that changes in inventory could affect the company's operating profit or loss. For example, if the company produces more units than it sells in a period, some of the fixed manufacturing overhead will be deferred to a future period instead of being expensed in the current period. This is a key distinction from Variable Costing; under Variable Costing, all fixed manufacturing overhead costs are treated as period costs and are expensed immediately. — Edspira is the creation of Michael McLaughlin, an award-winning professor who went from teenage homelessness to a PhD. Edspira’s mission is to make a high-quality business education accessible to all people. — SUBSCRIBE FOR A FREE 53-PAGE GUIDE TO THE FINANCIAL STATEMENTS, PLUS: • A 23-PAGE GUIDE TO MANAGERIAL ACCOUNTING • A 44-PAGE GUIDE TO U.S. TAXATION • A 75-PAGE GUIDE TO FINANCIAL STATEMENT ANALYSIS • MANY MORE FREE PDF GUIDES http://eepurl.com/dIaa5z — HIRE MICHAEL MCLAUGHLIN, PHD, CPA https://michaelmclaughlin.com/hire-me — GET CERTIFIED IN FINANCIAL STATEMENT ANALYSIS, IFRS 16, AND ASSET-LIABILITY MANAGEMENT https://edspira.thinkific.com — LISTEN TO THE SCHEME PODCAST Apple Podcasts: https://podcasts.apple.com/us/podcast... Spotify: https://open.spotify.com/show/4WaNTqV... Website: https://www.edspira.com/podcast-2/ — GET TAX TIPS ON TIKTOK   / prof_mclaughlin   — ACCESS INDEX OF VIDEOS https://www.edspira.com/index — CONNECT WITH EDSPIRA Facebook:   / edspira   Instagram:   / edspiradotcom   LinkedIn:   / edspira   — CONNECT WITH MICHAEL Twitter:   / prof_mclaughlin   LinkedIn:   / prof-michael-mclaughlin   — ABOUT EDSPIRA AND ITS CREATOR https://www.edspira.com/about/