Variable Costing Variable costing is the method that is used by the management (managers) for decision making purposes. The cost of goods manufactured includes direct materials, direct labor, and variable factory overhead . Fixed factory overhead is treated as period (fixed) expense. Contribution Margin Contribution margin is the excess of manufacturing margin above selling and administrative expenses. Contribution margin is calculated by deducting the variable cost from sales or deducting variable selling and administrative expenses from manufacturing margin. To Determine: The income statement according to the variable costing concept of the K Incorporation for the year ended December 3, 2016.
Variable Costing Variable costing is the method that is used by the management (managers) for decision making purposes. The cost of goods manufactured includes direct materials, direct labor, and variable factory overhead . Fixed factory overhead is treated as period (fixed) expense. Contribution Margin Contribution margin is the excess of manufacturing margin above selling and administrative expenses. Contribution margin is calculated by deducting the variable cost from sales or deducting variable selling and administrative expenses from manufacturing margin. To Determine: The income statement according to the variable costing concept of the K Incorporation for the year ended December 3, 2016.
Solution Summary: The author calculates the amount by which total annual income from operations would be reduced below its presented level if proposal 2 is selected.
Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.
Chapter 20, Problem 20.5BPR
1.
To determine
Variable Costing
Variable costing is the method that is used by the management (managers) for decision making purposes. The cost of goods manufactured includes direct materials, direct labor, and variable factory overhead. Fixed factory overhead is treated as period (fixed) expense.
Contribution Margin
Contribution margin is the excess of manufacturing margin above selling and administrative expenses. Contribution margin is calculated by deducting the variable cost from sales or deducting variable selling and administrative expenses from manufacturing margin.
To Determine: The income statement according to the variable costing concept of the K Incorporation for the year ended December 3, 2016.
2.
To determine
The amount by which total annual income from operations would be reduced below its presented level if the proposal 2 is accepted.
3.
To determine
To prepare: An income statement in the variable costing format, and indicating the projected annual income from operations if Proposal 3 is accepted.
4.
To determine
To determine: the value of total annual income increase above its present level if Proposal 3 is accepted.