The difference between concepts of Absorption costing and Variable Essay

The disparity between concepts of Absorption hailing and Variable Costing - Essay ExampleThe difference between concepts of Absorption costing and Variable Costing go cost are those be that crumb be easily associated with a specific identity that may be a product or a service. Cost incurred for purchase of strong, labor costs earned to produce the final product etc in all are a part of assume cost as they can be easily think with per unit cost of a product (Gazely M A & Lambert M, 2006). Such costs parti-color with the nature of a business, for instance if a company manufactures electronic gadget like microprocessor and an expert work manager is hired for the job then his salary would be considered as a direct cost or if an individual runs a car washing business which is imparting of service, then the wages stipendiary to the people hired for the job will be interpreted to be a direct cost. Direct costs are most of the time taken to be as variable costs. Variable costs inc rease proportionately with the increase in the quantity of ware, thus they are also considered to be direct costs in nature. But in case when the manager or person acquired to monitor the production process is paid a regular amount of salary every month or for a bad-tempered period of time irrespective of the volume of production then it is called a fixed cost. The various types of direct costs consist of direct materials and direct labor. Direct materials are straightaway identified with the particular product (Seal W, Garrison H R & Noreen W E, 2006). For instance, to manufacture product like furniture, direct material required for it would be wood, varnish, polish etc. When charging expenses to federally sponsored agreements, Virginia Commonwealth University (VCU) faculty and staff must be aware of the appropriateness of the charges. OMB Circular A-21 provides the criteria for direct charging costs to federally sponsored programs. The basic principle is that costs directly ch arged to a sponsored project must be allocable, allowable, reasonable and necessary, and treated consistently. A cost to be called as a direct cost must result in a direct strike from an activity and also it should be directly allocable to the specific project or task taken into consideration (Hilton W R, Robert J. Swieringa J R & Turner J M, 1988). On the whole direct costs must be Allocable if the costs can be bifurcated into various heads such as