Chapter 25, Problem 2PSA

Requirement 1:

To determine

We have to determine the three column comparative income statement.

To determine

Concept Introduction:

Variable cost method is a method of costing which is also termed as direct costing in which all variable manufacturing costs are allocated to the product during the period.

Total cost method is a method of costing in which total cost i.e. fixed cost and variable cost is considered to determine the selling price of a product.

Comparative income statement is a income statement which determines the profitability of two comparative alternatives. It determines the profitability by deducting total costs and expenses from sales value.

Requirement 2:

We have to determine whether company should accept the new offer.