Profit Centers: Comparison of Variable and Full Costing Yale Company manufactures hairbrushes that sell at wholesale for $3 per unit. The company had no beginning inventory in the prioryear. These data summarize the current and prior year operations:[LO 18-3, 18-4]Prior Year Current YearSales 1,800 units 2,200 unitsProduction 2,000 units $2,000 unitsProduction costFactory—variable (per unit) $0.60 $0.60—fixed $1,000 $1,000Marketing—variable $.40 $.40Administrative—fixed $500 $500Required1. Prepare an income statement for each year based on full costing.2. Prepare an income statement for each year based on variable costing.3. Prepare a reconciliation and explanation of the difference each year in the operating income resultingfrom using the full costing method and variable costing method.
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.
Profit Centers: Comparison of Variable and Full Costing Yale Company manufactures hair
brushes that sell at wholesale for $3 per unit. The company had no beginning inventory in the prior
year. These data summarize the current and prior year operations:
[LO 18-3, 18-4]
Prior Year Current Year
Sales 1,800 units 2,200 units
Production 2,000 units $2,000 units
Production cost
Factory—variable (per unit) $0.60 $0.60
—fixed $1,000 $1,000
Marketing—variable $.40 $.40
Administrative—fixed $500 $500
Required
1. Prepare an income statement for each year based on full costing.
2. Prepare an income statement for each year based on variable costing.
3. Prepare a reconciliation and explanation of the difference each year in the operating income resulting
from using the full costing method and variable costing method.
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