Thus it is only considered an expense when the product has been sold.are costs charged to products based on rates determined in advance at normal capacity. So if in a period the actual factory overhead costs are different from those charged then there will be excessive overhead charging or undercharging of overhead.
However if all the products processed in that period have not been Sri Lanka Phone Number sold the factory overhead costs whether more or less are reused to reduce or increase the cost of products that are still in inventory whether in the form of inventory of products in process or finished products. However if in one accounting period there is no over or undercharging of overhead.
So fixed factory overhead costs will have no influence on the profit and loss calculation before the product is sold. Elements of Product Costs Using the Variable Costing Method Variable costing is a method of determining the Cost of Production that only charges variable costs into the product cost price. According to variable costing the cost of a product consists of Raw Material Costs Variable.