Fixed manufacturing costs are $10 per unit, and variable manufacturing costs are $25 per unit. Selling and administrative costs are $3 per unit variable and $2 per unit Fixed. Production was 13,000 units, while sales were 12,000 units at a selling price of $75 per unit. Determine (a) whether variable costing operating income is less than or greater than absorption costing operating income and (b) the difference in variable costing and absorption costing operating income. (c) prepare an absorption costing income statement. (d) prepare a variable costing income statement. (e) in your own words explain the difference in the absorption
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.
Fixed
Determine (a) whether variable costing operating income is less than or greater than absorption costing operating income and (b) the difference in variable costing and absorption costing operating income.
(c) prepare an absorption costing income statement.
(d) prepare a variable costing income statement.
(e) in your own words explain the difference in the absorption and variable costing income statements.
This assessment includes why the operating income is different, what income statement managers use to make their decisions, and what components do they use to make decisions. How would these decisions impact the company and how would they change the income statement required by GAAP?
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