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A. Compute net income under i. Absorption Costing $ ii. Variable Costing

A. Compute net income under i. Absorption Costing $ ii. Variable Costing

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Grainger Company produces only one product and sells that product for $100 per unit. Cost information for the product is as follows: Direct Material $14 per Unit Direct Labor $25 per Unit Variable Overhead $5 per Unit Fixed Overhead $40,200 Selling expenses are $3 per unit and are all variable. Administrative expenses of $18,000 are all fixed. Grainger produced 6,000 units; sold 4,800; and had no beginning inventory. A. Compute net income under i. Absorption Costing $ ii. Variable Costing B. Which costing method provide higher net income? By how much? The method provided more net income by $
Transcribed Image Text:Grainger Company produces only one product and sells that product for $100 per unit. Cost information for the product is as follows: Direct Material $14 per Unit Direct Labor $25 per Unit Variable Overhead $5 per Unit Fixed Overhead $40,200 Selling expenses are $3 per unit and are all variable. Administrative expenses of $18,000 are all fixed. Grainger produced 6,000 units; sold 4,800; and had no beginning inventory. A. Compute net income under i. Absorption Costing $ ii. Variable Costing B. Which costing method provide higher net income? By how much? The method provided more net income by $
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The variable costing method and absorption costing are two methods of costing to find the cost of sales. Direct costs are those costs involved in the cost of goods sold, and indirect costs are those costs included in calculating the operating profit of a company. They are not directly associated with manufacturing. Variable costing takes only the variable costs associated with production, whereas absorption costing absorbs fixed costs into the cost of finished goods.

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