Benson Company incurred manufacturing overhead cost for the year as follows. Direct materials Direct labor Manufacturing overhead Variable Fixed ($18.60/unit for 1,700 units) Variable selling and administrative expenses. Fixed selling and administrative expenses $ 38.80/unit $ 27.50/unit $ 11.80/unit $31,620 $ 7,440 $14,100 The company produced 1,700 units and sold 1,200 of them at $180.70 per unit. Assume that the production manager is paid a 1 percen bonus based on the company's net income. Required a. Prepare an income statement using absorption costing. b. Prepare an income statement using varfable costing. c. Determine the manager's bonus using each approach. Which approach would you recommend for internal reporting?
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.
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