Absorption and variable costing income statements During the first month of operations ended July 31, YoSan Inc. manufactured 2,400 flat panel televisions, of which 2,000 were sold. Operating data for the month are summarized as follows: Sales ............................................................................................................................... $2,150,000 Manufacturing costs: Direct materials ..........................................................$960,000 Direct labor ................................................................. 420,000 Variable manufacturing cost ........................................156,000 Fixed manufacturing cost .............................................288,000 (total) $1,824,000 Selling and administrative expenses: Variable .................................................... .$204,000 Fixed ............................................. ........ 96,000 (total) $300,000 Instructions Prepare an income statement based on the absorption costing concept. Prepare an income statement based on the variable costing concept. Explain the reason for the difference in the amount of operating income reported in (1) & (2).
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.
Absorption and variable costing income statements
During the first month of operations ended July 31, YoSan Inc. manufactured 2,400 flat panel televisions, of which 2,000 were sold. Operating data for the month are summarized as follows:
Sales ............................................................................................................................... $2,150,000
Direct materials ..........................................................$960,000
Direct labor ................................................................. 420,000
Variable manufacturing cost ........................................156,000 Fixed manufacturing cost .............................................288,000 (total) $1,824,000
Selling and administrative expenses:
Variable .................................................... .$204,000 Fixed ............................................. ........ 96,000 (total) $300,000
Instructions
- Prepare an income statement based on the absorption costing concept.
- Prepare an income statement based on the variable costing concept.
- Explain the reason for the difference in the amount of operating income reported in (1) & (2).
Step by step
Solved in 4 steps
