Absorption Costing

This video explains the concept of Absorption Costing in Managerial Accounting. A comprehensive example is provided to explain how absorption costing is used to calculate per unit product costs as well as to create an absorption costing income statement. The video also contrasts the absorption costing method with the variable cost method and discusses how the use of absorption costing can lead to distorted measures of profitability and perverse managerial incentives.
-
Edspira is the creation of Michael McLaughlin, an award-winning professor who went from teenage homelessness to a PhD. Edspira’s mission is to make a high-quality business education freely available to the world.
-
SUBSCRIBE FOR A FREE 53-PAGE GUIDE TO THE FINANCIAL STATEMENTS, PLUS:
• A 23-PAGE GUIDE TO MANAGERIAL ACCOUNTING
• A 44-PAGE GUIDE TO U.S. TAXATION
• A 75-PAGE GUIDE TO FINANCIAL STATEMENT ANALYSIS
• MANY MORE FREE PDF GUIDES AND SPREADSHEETS
* eepurl.com/dIaa5z
-
SUPPORT EDSPIRA ON PATREON
* / prof_mclaughlin
-
GET CERTIFIED IN FINANCIAL STATEMENT ANALYSIS, IFRS 16, AND ASSET-LIABILITY MANAGEMENT
* edspira.thinkific.com
-
LISTEN TO THE SCHEME PODCAST
* Apple Podcasts: podcasts.apple.com/us/podcast...
* Spotify: open.spotify.com/show/4WaNTqV...
* Website: www.edspira.com/podcast-2/
-
GET TAX TIPS ON TIKTOK
* / prof_mclaughlin
-
ACCESS INDEX OF VIDEOS
* www.edspira.com/index
-
CONNECT WITH EDSPIRA
* Facebook: / edspira
* Instagram: / edspiradotcom
* LinkedIn: / edspira
-
CONNECT WITH MICHAEL
* Twitter: / prof_mclaughlin
* LinkedIn: / prof-michael-mclaughlin
-
ABOUT EDSPIRA AND ITS CREATOR
* www.edspira.com/about/
* michaelmclaughlin.com

[@manunited998]

I don't even know why I go to University when this free resource is 100x better than anything they have to offer. God bless you Sir.

[@Edspira]

Thank you!

[@aminulhaque4821]

manunited998 for a degree lol 😂😂😂

[@yoqiu_]

I feel the same way

[@B.ANGELS2023]

I also feel the same way like why do they complicate stuff, smh.

[@mdabdullah4379]

You need the certificate bruh.. Just knowing this stuff won't benefit you. You need the certificate too

[@NowakiFangirl]

I wish you were my professor. Mine just mumbles and scribbles on the board. I never know whats going on in class, if it weren't for this channel I wouldn't be passing. Thank you for taking the time to make these videos.

[@Edspira]

+Grace Bunting It's my pleasure. Thanks for making me laugh and bringing a smile to my face!

[@hkangelfish0710]

same here. Mine just read the notes... Basically no one knew what is going on and we need to prepare for the exam.

[@fortunemaphosa9920]

As for the scribbling part....that's when I just decide to sleep during lectures

[@dorororo]

I just passed a CPA exam thanks to these videos! Keep up the great work.

[@Edspira]

+dorororo Congratulations! The CPA exam is a difficult test, so clearly you put in a lot of hard work and studying. I wish you all the best and hope you have an excellent career!

[@ZiaurRahmanAdvocate]

congrats and good luck in life

[@gm5328]

Wow congrats!!!

[@siziwelupondo2530]

Congratulations 🥳

[@henryd7302]

Congrats!

[@abubacarrbah7626]

Sir, you are naturally gifted. I wish you are the guy who stands in from of our class.Your explanation is simply and clearly magnificent .you deserve to be called a professor.thank you for the sensational job.You really gave me correct foundation under this topic.thank you so much, professor.

[@JohnYuFitness]

This is by far one of my favorite videos from the channel. It made absorption costing more understandable. For anyone out there, this entire channel covers practically both the finance and managerial accounting courses in most MBA programs.

[@adafunk]

As someone who struggles reading through text books for hours, your videos are a god send. Thank you so much!

[@Edspira]

Wow, thank you!

[@laibamasood2296]

Same here (after 2 years tho. lol)

[@heyitschika]

i don't think i would have passed if it weren't for you! thank you very much for making these videos.

[@Edspira]

No problem, congratulations on passing the course!

[@emilythatblonde]

Thank you for saving my life for my accounting exam. I don't know how, but my professors have a gift for making everything seem SO difficult, whereas when you explain it, it seems very straightforward.

[@rob8482]

These videos are incredible. Presented as timely, and informative as possible. These videos have absolutely given me at least, a 50% better chance along with studying my book to do well on my finals. I'm so very thankful! They enable my book to make sense to me! Double WOW !!!

[@Edspira]

Robert,
I really appreciate all your comments. Positive comments like yours keeps me motivated to continue putting out more videos. Best of luck to you on your managerial accounting final!

[@calebriutta9867]

Yes, i to am cursed with a bad teacher. But, my teacher shouts bad English (she is from China)

[@acto5948]

Your videos just saved me from failing my finance and accounting exams. THANK YOU!!!

[@Edspira]

Glad to hear it. Congratulations on passing your classes!

[@femiayinuola2725]

Why should someone dislike this great educative video? Thanks for passing out knowledge...Nice video

[@kestonluke6439]

I am an MBA student, and this is amazing. I am also a teacher, and I feel like I am in the driver's seat in this course. I love your teaching approach.

[@joshuavickers9820]

Shut the fuck up

[@warmongerfenrir8524]

@@joshuavickers9820 depressed today aren't we

[@abhilaasha]

You are epitome of perfection in every sense. I can't be more thankful to you!

[@gaonemokute8896]

i passed my F2 ACCA management accounting exam because of you EDSPIRA, a huge thanks!

[@yosefnaiman5758]

You are amazing!! I used your videos for Accounting 1 and now I continue to use them for Accounting 2 as well as Cost Accounting! I recommend your videos to all of my friends. Thank you so much

[@killianmorar7662]

3 hours till finals and you're contributing to turning water into wine. A1 my man, thankyou.

[@xxQuInNzeLLxx]

Please don't stop making these videos they've helped me so much with my exams and revision the breakdown on each step is excellent thankyou!!!

[@jeanmaxwell5149]

Thank you for clearing up this method of costing, excellent presentation!

[@alisonw4883]

Studying for CPA right now and your vids have been a great help. Thank you so much!

[@Edspira]

Best of luck!

[@jimmyc4611]

FANTASTIC CHANNEL!! I'm in a MAcc program and this is phenomenal. Explains complex concepts that normally involve 20 pages of textbook + several hour long lectures in minutes.

[@RA-nu8ue]

you can't imagine how much you helped me in my graduation from the faculty of commerce this year sir! thank you so much .. it wouldn't happen without you thanks again

[@prashanthsk27]

You just make things so easy to understand that appears so complex when my professor teaches.. Please keep up this great work. God bless you with more success.

[@MetallicOpeth]

Edspira takes something I would study in a book for a while and just makes it so simple to picture and apply in your head. love everything you do and have done sir

[@Edspira]

Thank you for the kind words!

[@veenarasagnya]

have a managerial accounting exam in 6 hours and im only passing because of you . THANK YOU SO MUCH

[@ZiaurRahmanAdvocate]

good luck

[@navaskoorimannil]

simple and precise explanation. great work. thanks

[@mamounalkhaileh7826]

I have the worst instructure; he only reads the slides and he will ask question without giving us a chance to answer because he always answers them. I am so delighted I found this video.

[@Edspira]

Mamoun,
I'm glad you liked the video. I have more managerial accounting videos for free on my website if you need any additional instruction: edspira.com/courses/managerial-accounting Good Luck in your class!

[@tarekalsherif57]

That is really a very clear explaining,
Thank you!

[@petersiep]

This video was a great tool to understand the concept, thank you so much!

[@ItsMickSay]

you definitely are heaven sent sir! I'm really glad you take time and effort in your videos. you are helping a lot of students. Especially me, CPA in transit. :D thank you!

[@MrShem123ist]

Sir, you are saving my life here. I'm reviewing for our comprehensive exam in the undergrad. Thank you so much for these videos.

[@candaceseayfolks7954]

Thanks so much. This was very helpful to understand the method. I especially appreciated the last few minutes where it all came together!

[@acovarrubias12]

Thank you so much Edspira!

[@MrBuckethead911]

You, sir, are an absolute legend! Thank you! :)

[@spof465]

This helped me out significantly. Nice and clear compared to my actual teacher. Good work!

[@Rorisang-xq6dp]

I am studying with regent business school this video is very helpful. You are the best teacher thank you so much sir.

[@2000hwhump]

Terrific explanation, sir. Thank you!

[@shivmishra4205]

thank u so much for making such kind of video!!! really appreciate your efforts

[@Convees]

Very helpful for ACCA preparation!

[@mattyred]

Really, really good video! Thanks so much!!!!

[@J3lazeify]

You have just earned a subscriber. I am not being arrogant or anything, but I rarely subscribe to educational channels; however, you sir, deserve it.

[@NataliaM009]

Thank you for these videos. I am studying CPA right now and their explanations are not comparable to yours. I only start understanding things after watching your videos.

[@sazzadhossain1850]

Dear Sister I am also student Chartered Accountant in Bangladesh [phone]

[@sazzadhossain1850]

Natasha Matthew pls call me here [phone]

[@loril6773]

Thank you! I love your videos!

[@tajwarchowdhury22]

Thanks man. You can explain really well

[@katiemclaughlin1582]

Your videos are so effective, you've helped me out so much. Thank you!

[@Edspira]

Thanks, and good luck in your studies!

[@user-jg2xx6ib8r]

THANKS FOR YOUR CLASS . LEARN A LOT .

[@Edspira]

云生活云朵快报 My pleasure, thank you!!

[@valeriagallo1069]

you are just absolutely clear and good at explaining! keep on and thank u!

[@Edspira]

You're very welcome!

[@kawishraza3493]

Thanks man, really helped me a lot.

[@yuniorgalardy2781]

Thank you very much for this video. Im studying for the CPA exam and your video has been of great help. Please keep posting more videos.

[@Edspira]

No problem. I hope you pass the CPA exam on your first try and go on to have an excellent career!

[@Sophie-jl3sj]

This is awesome!!!!

[@Edspira]

Sophie Wang Thank you!

[@waaafey3135]

Thanks for the brief introduction sir, God bless you ♥️

[@mrdimosssssss]

thank you very much, these videos help so much.

[@mbarnaamij]

This is very helpful. Thank you

[@patkuffour3493]

Thanks Professor. Your super helpful!!!!!!!!!!!!!!!!!!

[@gregorybai4226]

Thanks very much for the video...it explains more clear than our text book and our lecture as well....wish my lecture could be like this...many many thanks

[@Edspira]

Thanks Gregory! I have many managerial accounting videos if you you'd like to check them out. All of them are free of charge. Best of luck to you in your studies! www.edspira.com/courses/managerial-accounting

[@RaRa-Online]

Thank you very much sir. This helped me a lot.

[@Bipplov]

Thanks a lot. Your videos are of great help to me.

[@Edspira]

No problem! Best wishes :)

[@padairmacleod9371]

Great video! Thanks for the help

[@Edspira]

No problem my friend

[@sololife8854]

Thank you for the video! :)

[@fayegaritta4090]

Thank you so much!!

[@farhanalam4413]

Great explanation 😃

[@nomoremunyanyavira7988]

thanks you so much,you take me to another step

[@SunsetFilmsCo]

I really appreciate your simplicity. why aren't you my professor

[@madurameshan9342]

Thank you for your videos! It's really helpful and I recommend it to all my uni friends :)

[@Edspira]

Thank you for the encouragement and support!

[@kathyJF15]

best accounting professor ever!!

[@Edspira]

Thanks for the confidence booster!

[@johnkang6221]

My professor literally can't even teach. How hard is it to give us some examples like this video.

[@eilenkatarinalunde2969]

Very good, thanks

[@reverbvibes932]

You are the best! God bless you

[@Edspira]

Thank you!

[@amadhafez6309]

One Word: Excellent.

[@Edspira]

Thank you sir! Best wishes

[@lesleynakeng2100]

give that man a bell

[@nomnom6136]

the way yu teach is amazing.... plz continue to make videos tnx..

[@Edspira]

Thank you!

[@rehnumatarannum869]

trust me u r god gifted. Thank u sir :)

[@willsthiek1953]

Thanks for enlightening on this issue, sir.

[@Edspira]

No problem. Glad to help!

[@kokilaudawatte2980]

Really this was very helpful to me thanku sir👌🙂

[@nisserov]

New Business Controller at my new job. They are using Absorption Costing, which my old job never did - we only just variable costing. This firm moved from variable to Abs costing five years back due to new management. I´ve only seen disadvantages with this method, and frankly was kinda hoping that you could shed some light onto it. Why are companies using it for other reasons that "well everybody else is using it for external sales"? There must be something good with it....I hope :/

[@cyriljohnson4489]

Excellent,

[@taj935]

It's really helpful sir
Love and respect from jalalabad Afghanistan

[@Edspira]

Thanks! I'm always surprised at how many different countries watch these videos. Hello to Afghanistan!

[@ayahazzam7781]

amazing !

[@elicajeles]

Thank you for this! I'm trying to defend Absorption Costing for our debate.

[@Edspira]

+Elidesa Cajeles (5sosfifthhero) Thank you and good luck with the debate!

[@Sneha_agarwal8]

+Education Unlocked really nice for studying online...looking forward for more stuff..!

[@CristyBell]

Thank you sooooo much.

[@Edspira]

No problem. In the event you need more instruction on job order costing, I have 8 videos on this topic: edspira.com/lessons/job-order-costing
Thanks for watching!

[@ntsikanyiba]

Brilliant!

[@Edspira]

Thanks!

[@ZiaurRahmanAdvocate]

A very good learning video...

[@Edspira]

Thank you sir!

[@thomasarop863]

it's great help ever

[@josephdecker5660]

wonderful.

[@drallisimo34]

great tut!!!

[@Edspira]

Thanks Dan, and happy studies!

[@vijithsoman]

thank you that helped!

[@Edspira]

No problem. Happy studies!

[@intrinsicallyme8404]

I just did an essay on this and even though my predicted grades are great I'm still unable to understand what the difference between the two is. This vid is amazing.

[@Edspira]

Thanks!

[@nabeelahmad5015]

Oooh perfect,now i know that why absorption costing profit increases when their is increase in production.

[@puspensadhukhan3899]

Thank u so much sir

[@vijjapuanilkumar5152]

Great explanation sir TQ for this..
It helps alot for my preparation for cma final 👏🙏
- Anil from INDIA

[@Edspira]

Good luck on the CMA!

[@Kevin-jk1vr]

Better than my uni lecturer

[@suyi1846]

thanks, sir

[@nightthemare4742]

perfect same as alwayssss

[@user-pe4gz3mi2e]

thanks you sir

[@farjadmallick214]

great video

[@Edspira]

+Farjad Mallick Thanks!

[@numaniqbal2261]

Thanks

[@bricksInMyBp]

If I understand correctly, under Abs Costing, CGS is calculated both on Units Sold (DM+DL+MO) and Fixed MO divided by units produced? Whereas sales is only calculated on units sold. (referring to 60000/20 in Q2, as this is the only place I see the 20 units referred to when calculating CGS).

[@Sam-yt3dq]

Thank you

[@Edspira]

Welcome!

[@hellenkaala6403]

thanks

[@UserMeme-jh1no]

u made it easy good i wish were my prof

[@Edspira]

Thank you!

[@hassanladha9337]

perfect