Exercise 6-9 Income statement under absorption costing and variable costing LO P1, P2 [The following information applies to the questions displayed below.] Cool Sky reports the following costing data on its product for its first year of operations. During this first year, the company produced 42,000 units and sold 34,000 units at a price of $130 per unit. Manufacturing costs Direct materials per unit $ 54 Direct labor per unit $ 20 Variable overhead per unit $ 6 Fixed overhead for the year $ 462,000 Selling and administrative costs Variable selling and administrative cost per unit $ 10 Fixed selling and administrative cost per year $ 110,000. 1b. Assume the company uses absorption costing. Prepare its income statement for the year under absorption costing. 2a. Assume the company uses variable costing. Determine its product cost per unit. 2b. Assume the company uses variable costing. Prepare its income statement for the year under variable costing.
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.
![Exercise 6-9 Income statement under absorption costing and variable costing LO P1, P2 [The following information
applies to the questions displayed below.] Cool Sky reports the following costing data on its product for its first year of
operations. During this first year, the company produced 42,000 units and sold 34,000 units at a price of $130 per unit.
Manufacturing costs Direct materials per unit $ 54 Direct labor per unit $ 20 Variable overhead per unit $ 6 Fixed
overhead for the year $ 462,000 Selling and administrative costs Variable selling and administrative cost per unit $ 10
Fixed selling and administrative cost per year $ 110,000.
1b. Assume the company uses absorption costing. Prepare its income statement for the year under absorption costing.
2a. Assume the company uses variable costing. Determine its product cost per unit.
2b. Assume the company uses variable costing. Prepare its income statement for the year under variable costing.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe72db9c3-1f9d-442a-ba62-bcb6d45fbdb1%2F260931bb-71bd-42e7-8e9d-1d1d37353ca7%2F7cteh5e_processed.jpeg&w=3840&q=75)
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