Variable and Absorption Costing Bing Company sells its product for $106 per unit. Variable manufacturing costs per unit are $47, and fixed manufacturing costs at the normal operating level of 12,000 units are $240,000. Variable selling expenses are $18 per unit sold. Fixed administrative expenses total $104,000. Bing had no beginning inventory in 2016. During 2016, the company produced 12,000 units and sold 9,000. Would net income for Bing Company in 2016 be higher if calculated using variable costing or using absorption costing? Calculate reported income using each method. Do not use negative signs with any answers. Absorption Costing Income Statement Sales Answer Cost of Goods Sold: Beginning Inventory Answer Variable Costs Answer Fixed Costs Answer Less: Ending Inventory Answer Cost of Goods Sold Answer Answer Answer Answer Answer Administrative expense Answer Net Income Answer Variable Costing Income Statement Sales Answer Cost of Goods Sold: Beginning Inventory Answer Variable Costs Answer Answer Answer Variable cost of goods sold Answer Answer Answer Answer Answer Fixed costs: Answer Answer Administrative Expense Answer Total Fixed Cost Answer Net Income Answer
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Variable and Absorption Costing
Bing Company sells its product for $106 per unit. Variable
Calculate reported income using each method.
Do not use negative signs with any answers.
| Absorption Costing Income Statement | ||||
|---|---|---|---|---|
| Sales | Answer | |||
| Cost of Goods Sold: | ||||
| Beginning Inventory | Answer | |||
| Variable Costs | Answer | |||
| Fixed Costs | Answer | |||
| Less: Ending Inventory | Answer | |||
| Cost of Goods Sold | Answer | |||
| Answer | Answer | |||
| Answer | Answer | |||
| Administrative expense | Answer | |||
| Net Income | Answer |
| Variable Costing Income Statement | ||||
|---|---|---|---|---|
| Sales | Answer | |||
| Cost of Goods Sold: | ||||
| Beginning Inventory | Answer | |||
| Variable Costs | Answer | |||
| Answer | Answer | |||
| Variable cost of goods sold | Answer | |||
| Answer | Answer | |||
| Answer | Answer | |||
| Fixed costs: | ||||
| Answer | Answer | |||
| Administrative Expense | Answer | |||
| Total Fixed Cost | Answer | |||
| Net Income | Answer |
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