The difference between concepts of Absorption costing and Variable Essay

The difference between concepts of ingress costing and Variable Costing - Essay ExampleThe difference between concepts of Absorption costing and Variable CostingDirect costs atomic number 18 those costs that can be easily associated with a specific identity that may be a product or a service. Cost incurred for purchase of material, labor costs earned to produce the final product etc all ar a part of direct cost as they can be easily linked with per unit cost of a product (Gazely M A & litre M, 2006). Such costs vary with the nature of a business, for instance if a company manufactures electronic gadget like microprocessor and an expert production manager is hire for the job consequently his salary would be considered as a direct cost or if an individual runs a car washing business which is pass on of service, then the wages remunerative to the people hired for the job will be taken to be a direct cost. Direct costs are most of the time taken to be as variable costs. Variable c osts increase proportionately with the increase in the quantity of production, 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 particular period of time irrespective of the volume of production then it is called a fixed cost. The different types of direct costs consist of direct materials and direct labor. Direct materials are directly identified with the particular product (Seal W, fort 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) efficacy 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 directl y charged 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 gain 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 bifurcate into various heads such as