Absorption costing

Absorption costing

Bachelor of Business Studies (BBS) — Second Year

Subject: Cost and Management Accounting (MGT 212)

Unit 6: Accounting for Profit Planning

Academic Year: 2083/84

Topic Objectives

After studying this topic, students should be able to:

• Explain the scope and key elements of absorption costing.
• Prepare the relevant cost records or calculations and interpret their use in managerial planning and control.

Curriculum Scope

• Concept, features and importance
• Income-statement preparation
• Normal capacity and fixed manufacturing-overhead rate
• Opening and closing stock
• Over- and under-absorbed overhead adjustments
• Limitations

Detailed Microsyllabus

1. Absorption costing

   1. Product costs including fixed manufacturing overhead.
   2. Normal capacity and the absorption rate.
   3. Opening and closing stock valuation.

2. Income statement

   1. Prepare the prescribed absorption-costing statement.
   2. Adjust over- or under-absorbed overhead.
   3. Interpret uses and limitations of the reported profit.

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Curriculum reference: Tribhuvan University, Faculty of Management, revised four-year BBS curriculum, PDF pages 31-34.

Source note: The curriculum scope above is retained from the existing TU syllabus breakdown. The numbered study subtopics are editorial elaborations for teaching and study, rather than a separately issued TU syllabus. Unit or component allocations apply at their stated level; no separate topic hours or marks are assigned here.