ome Statements under Absorption and Variable Costing Shawnee Motors Inc. assembles and sells MP3 players. The company began operations on August 1 and operated at 100% of capacity during the first month. The following data summarize the results for August: Sales (14,500 units) $1,450,000 Production costs (19,000 units): Direct materials $703,000 Direct labor 338,200 Variable factory overhead 169,100 Fixed factory overhead 112,100 1,322,400 Selling and administrative expenses: Variable selling and administrative expenses $205,000 Fixed selling and administrative expenses 79,300 284,300 If required, round interim per-unit calculations to the nearest cent. a. Prepare an income statement according to the absorption costing concept. Shawnee Motors Inc. Absorption Costing Income Statement For the Month Ended August 31 Sales $ Cost of goods sold Gross profit $ Selling and administrative expenses Income from operations $ Feedback a. Under absorption costing, the cost of goods manufactured includes direct materials, direct labor, and factory overhead costs. Both fixed and variable factory costs are included as part of factory overhead. Learning Objective 1. b. Prepare an income statement according to the variable costing concept. Shawnee Motors Inc. Variable Costing Income Statement For the Month Ended August 31 Sales $ Variable cost of goods sold Manufacturing margin $ Variable selling and administrative expenses Contribution margin $ Fixed costs: Fixed factory overhead $ Fixed selling and administrative expenses Total fixed costs Income from operations $
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.
ome Statements under Absorption and Variable Costing
Shawnee Motors Inc. assembles and sells MP3 players. The company began operations on August 1 and operated at 100% of capacity during the first month. The following data summarize the results for August:
| Sales (14,500 units) | $1,450,000 | |||
| Production costs (19,000 units): | ||||
| Direct materials | $703,000 | |||
| Direct labor | 338,200 | |||
| Variable factory |
169,100 | |||
| Fixed factory overhead | 112,100 | 1,322,400 | ||
| Selling and administrative expenses: | ||||
| Variable selling and administrative expenses | $205,000 | |||
| Fixed selling and administrative expenses | 79,300 | 284,300 |
If required, round interim per-unit calculations to the nearest cent.
a. Prepare an income statement according to the absorption costing concept.
| Shawnee Motors Inc. | |
| Absorption Costing Income Statement | |
| For the Month Ended August 31 | |
| Sales | $ |
| Cost of goods sold | |
| Gross profit | $ |
| Selling and administrative expenses | |
| Income from operations | $ |
a. Under absorption costing, the cost of goods manufactured includes direct materials, direct labor, and factory overhead costs. Both fixed and variable
Learning Objective 1.
b. Prepare an income statement according to the variable costing concept.
| Shawnee Motors Inc. | ||
| Variable Costing Income Statement | ||
| For the Month Ended August 31 | ||
| Sales | $ | |
| Variable cost of goods sold | ||
| Manufacturing margin | $ | |
| Variable selling and administrative expenses | ||
| Contribution margin | $ | |
| Fixed costs: | ||
| Fixed factory overhead | $ | |
| Fixed selling and administrative expenses | ||
| Total fixed costs | ||
| Income from operations | $ |
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