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Discuss: full absorption variable target costing ABC

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SAC currently uses a basic standard cost system. Management knows very little about other concepts of costing and the benefits of having multiple costing methods. Your superior has asked that you and your team put together a presentation to management explaining various costing concepts as it relates to SAC (explain the usage and benefits of each).

As a SAC corporate business financial analyst, you must have an expert understanding of the various costing methods. Within your groups, divide the costing concepts among the individual team members to analyze and become an expert in at least one costing concept within your group.

Write a paper to include the following:
the definition of the concept
how and when the concept could be used by SAC
how the application of the concept differs from the other concepts
its advantages and disadvantages

Costing Concepts:
full costing/absorption costing
variable costing
target costing
life-cycle costing
activity-based costing

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Solution Summary

Your tutorial is 677 words and gives you a paragraph for each method to get you started on your discussion.

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Full costing/absorption costing

Full costing or absorption costing method requires that you inventory fixed overhead. This should be used when you need to comply with generally accepted accounting principles (GAAP). This differs from variable costing because variable costing does not capitalize fixed production costs to individual inventory items. The advantage is that it complies with GAAP but the disadvantage is that it gives an impression that costs have shifted when volume changes because the fixed cost per unit changes with activity even when the total fixed costs is stable.

Variable costing
Variable costing does not capitalize fixed production costs to individual inventory items. This is useful when making decisions because the inventory contains only variable costs and so the incremental costs is clear (variable costs). The disadvantage is that it does not comply with GAAP but the advantage is that it does not sway with activity due to the fixed cost per unit changing with activity even when the total ...

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