A COMPARATIVE ANALYSIS OF NORMAL COSTING METHOD WITH FULL COSTING AND VARIABLE COSTING IN INTERNAL REPORTING

Product costs are a significant determinant of both short-term and long-term decisions of businesses in terms of goal achievement. In determining the costs, businesses are expected to consider both the characteristics of the market (demand) and the business itself. Product costs are calculated by cost calculation methods. Cost calculation methods are normal costing method, full costing, variable costing. Full costing treats the costs of all manufacturing components (direct material, direct labor, variable factory overhead and fixed factory overhead) as inventoriable, or product, costs. Variable costing is a cost accumalition method that includes only variable production costs (direct materal, direct labor and variable factory overhead) as inventoriable, or product, cost. Normal costing method takes into account all the variable parts of production costs. The method handles fixed operating costs according to the rate of capacity utilization. In this study, the effects of choosing either full costing , variable costing or normal costing on costs in terms of varying amounts of production are analyzed