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Concept Introduction:
Variable costing: Variable costing is one of the methods of calculation of product costs. Under this method, only the variable
Absorption costing: Absorption costing is one of the methods of calculation of product costs. Under this method, the fixed manufacturing
Requirement-a:
To Calculate:
The cost per order using the variable and absorption costing methods
Concept Introduction:
Variable costing: Variable costing is one of the methods of calculation of product costs. Under this method, only the variable manufacturing costs are considered as part of the product cost. Under this method, the income statement calculates contribution margin and net operating income.
Absorption costing: Absorption costing is one of the methods of calculation of product costs. Under this method, the fixed manufacturing overheads are also considered as part of the product cost with direct costs. The unit product cost includes direct material, direct labor, and variable overhead and allocated amount of fixed overhead. Under this method, the income statement calculates Gross margin and net operating income.
Requirement-b:
To Calculate:
The difference in the operating incomes under variable and absorption costing method if there were 4200 units in the ending inventory
Concept Introduction:
Variable costing: Variable costing is one of the methods of calculation of product costs. Under this method, only the variable manufacturing costs are considered as part of the product cost. Under this method, the income statement calculates contribution margin and net operating income.
Absorption costing: Absorption costing is one of the methods of calculation of product costs. Under this method, the fixed manufacturing overheads are also considered as part of the product cost with direct costs. The unit product cost includes direct material, direct labor, and variable overhead and allocated amount of fixed overhead. Under this method, the income statement calculates Gross margin and net operating income.
Requirement-c:
To Calculate:
The cost formula for orders and total cost for additional 500 units
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Chapter 13 Solutions
Accounting: What the Numbers Mean
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