Hayek Bikes prepares the income statement under variable costing for its managerial reports, and it prepares the income statement under absorption costing for external reporting. For its first month of operations, 375 bikes were produced and 225 were sold; this left 150 bikes in ending inventory. The income statement information under variable costing follows. Sales (225 × $1,600) $ 360,000 Variable product cost (225 × $625) 140,625 Variable selling and administrative expenses (225 × $65) 14,625 Contribution margin 204,750 Fixed overhead cost 56,250 Fixed selling and administrative expense 75,000 Net income $ 73,500 1. Prepare this company's income statement for its first month of operations under absorption 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.
Hayek Bikes prepares the income statement under variable costing for its managerial reports, and it prepares the income statement under absorption costing for external reporting. For its first month of operations, 375 bikes were produced and 225 were sold; this left 150 bikes in ending inventory. The income statement information under variable costing follows.
| Sales (225 × $1,600) | $ | 360,000 | |
| Variable product cost (225 × $625) | 140,625 | ||
| Variable selling and administrative expenses (225 × $65) | 14,625 | ||
| Contribution margin | 204,750 | ||
| Fixed |
56,250 | ||
| Fixed selling and administrative expense | 75,000 | ||
| Net income | $ | 73,500 | |
1. Prepare this company's income statement for its first month of operations under absorption costing.
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