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Cost Flows Part 4

 

This diagram shows the relationships between manufacturing resource inputs [labor, material, and overhead], inventories [and the balance sheet] and cost of goods sold [and the income statement]. In our review of the income statement, we noted the distinction between absorption costing [required for GAAP] and variable costing, which is especially useful for internal decision making. Variable costing is the foundation for CVP and breakeven analysis. For a more detailed conceptualization of the relationships involved in absorption and variable costing, click "next."

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Copyright 2004 Gerald M. Myers. All rights reserved. This site has been developed as aid to instructors and students in managerial accounting. The scenarios contained herein are not intended to reflect effective or ineffective handling of managerial situations. Any resemblance to existing organizations is purely coincidental.
Last modified: August 03, 2005