Hi to everybody,
I am a newbie to navision. I am reading manufacturing costing. I got some doubts.
what is difference between Absorption Costing Vs Actual Direct Costing.
I am very grateful if u provide some solution with detail explanation.
thanks
You need to talk to one of your accounts consultants, as these are accounting principles. When you are implementing NAV the business will tell you how they want this done.
Absorption means all costs are considered, the element of insurance, lighting etc will be included in the product cost as well as labour and materials. I would venture that this is usually built in to the traditional standard costing element, I am not sure anyone will apportion electricity charges as an item charge over every output in the quarter!
Direct costing shows the item cost as those costs “directly” attributable to the item. These will traditionally be raw material and labour. Again this could be a basis for the standard cost with the other overheads seen in other areas of the chart of accounts, but this approach also leads to other costing methods being adopted in the manufacturing environment.
All of this has an impact on the valuation of stock as well.
Not being an accountant if any of our accounts readers can write a “proper” defintion I am sure it would be appreciated.