Harry Company produces shoes. Harry plans to sell 29000 pairs of shoes at a selling price of $59 per unit over the next month. Harry estimates the following costs for the next month: Cost Formula COGS $28/pair Sales Commission 4% of sales Employees' Salaries $87,000 per month Depreciation $300 per month Shipping $32,000 per month + $3/pair Presuming both use the same costing system, what is the difference between the net operating income calculated on traditional format income statement and that on a contribution format income statement for the next month (in dollars)?
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.
Harry Company produces shoes. Harry plans to sell 29000 pairs of shoes at a selling price of $59 per unit over the next month. Harry estimates the following costs for the next month:
| Cost | Formula |
| COGS | $28/pair |
| Sales Commission | 4% of sales |
| Employees' Salaries | $87,000 per month |
| $300 per month | |
| Shipping | $32,000 per month + $3/pair |
Presuming both use the same costing system, what is the difference between the net operating income calculated on traditional format income statement and that on a contribution format income statement for the next month (in dollars)?
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