[Anonymous]

I am trying to wrap my head around variable vs. absorption costing in Becker, but I’m hung up on variable SG&A under variable costing. It is apparently a period cost, even though it is used to arrive at contribution margin. Everything else for both methods seems to be that the product costs are used to arrive at the respective margins (gross and contribution), while the period costs are deducted after to arrive at operating income. However, variable SG&A under variable costing seems to be both part of the contribution margin and a period cost.
Can somebody please explain this, and maybe show me that I am just overthinking it?
Thank you!

[CPAoneday]

I think you are over-analyzing variable costing and using GAAP rationale to decipher it. They are completely different metrics used for different reasons. Don't try to make a variable costing puzzle piece fit into a GAAP puzzle.

Variable costing subtracts all variable costs from sales to arrive at CM. It does not matter whether its a period or product cost; if it's variable in nature, it's subtracted.

GAAP cares about product costs to determine GM. It does not care if it's a variable or fixed cost; if it's a product cost subtract it.

You will find that the upcoming Becker lectures deal with CM a lot, and should help solidify your understanding. My advice would be to think of variable costing as its own beast, not as a branch off of GAAP.

Hope this helps. Good luck in your studies.

F – 91
A – 88
R – ??
B – 6/4

[Anonymous]

That is very helpful. Thank you!

[CPAoneday]

@Brandon

When are you taking BEC?

[Anonymous]

June 9th

[Author]

Replies