Linden Company manufactures and sells a single product. Cost data for the product follow: Variable costs per unit: Direct materials $5 Direct labor $10 Variable factory overhead $3 Variable selling and administrative $1 Total variable costs per unit $19 Fixed costs per month: Fixed manufacturing overhead $108,000 Fixed selling and administrative $175,000 Total fixed cost per month $283,000 The product sells for $50 per unit. Production and sales data for May and June, the first two months of operations, are as follows: Units Produced Units Sold May 18,000 14,000 June 18,000 22,000 Income statements prepared by the accounting department, using absorption costing, are presented below: May. June Sales $700,000. $1,100,000 Cost of goods sold. $336,000. $528,000 Gross margin $364,000. $572,000 Selling and administrative expenses. $189,000 $197,000 Net operating income. $ 175,000. $375,000 Determine the unit product cost under absorption costing and variable costing. Prepare contribution format variable costing income statements for May and June. Reconcile the variable costing and absorption costing net operating incomes
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.
Linden Company manufactures and sells a single product. Cost data for the product follow:
Variable costs per unit:
Direct materials $5
Direct labor $10
Variable factory
Variable selling and administrative $1
Total variable costs per unit $19
Fixed costs per month:
Fixed manufacturing
overhead $108,000
Fixed selling and
administrative $175,000
Total fixed cost per
month $283,000
The product sells for $50 per unit. Production and sales data for May and June, the first two months of
operations, are as follows:
Units
Produced Units Sold
May 18,000 14,000
June 18,000 22,000
Income statements prepared by the accounting department, using absorption costing, are presented
below:
May. June
Sales $700,000. $1,100,000
Cost of goods
sold. $336,000. $528,000
Gross margin $364,000. $572,000
Selling and administrative
expenses. $189,000 $197,000
Net operating
income. $ 175,000. $375,000
Determine the unit product cost under absorption costing and variable costing.
Prepare contribution format variable costing income statements for May and June.
Reconcile the variable costing and absorption costing net operating incomes.
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