2. Variable and Absorption Costing ZKB Company manufactures a unique device that is used by internet users to boost Wi-Fi signals. The following data relates to the first month of operation: Beginning inventory: 0 units Units produced: 40,000 units Units sold: 35,000 units Selling price: $120 per unit Marketing and administrative expenses: Variable marketing and administrative expenses per unit: $4 Fixed marketing and administrative expenses per month: $1,120,000 Manufacturing costs: Direct materials cost per unit: $30 Direct labor cost per unit: $14 Variable manufacturing overhead cost per unit: $4 Fixed manufacturing overhead cost per month: $1,280,000 Management is anxious to see the success as well as profitability of newly designed unique booster. Required: 1. Calculate unit product cost and prepare income statement under variable costing system and absorption costing system 2. Prepare income statement under two costing system. 3. Prepare a schedule to reconcile the net operating income under variable and absorption costing system.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
- Calculate unit product cost and prepare income statementunder variable costing system and absorption costing system.
- Prepare income statementunder two costing system.
- Prepare a schedule to reconcile the net operating income under variable and absorption costing system.
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