Bundle: Managerial Accounting, 14th + Cengagenowv2, 1 Term Printed Access Card
Bundle: Managerial Accounting, 14th + Cengagenowv2, 1 Term Printed Access Card
14th Edition
ISBN: 9781337499989
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 6, Problem 3E

(a)

To determine

Absorption Costing

Absorption costing is compulsory under Generally Accepted Accounting Principles (GAAP) for financial statements circulated to the external users. Under absorption costing, the cost of goods manufactured includes direct materials, direct labor, and factory overhead costs. Fixed factory overhead and variable factory overhead included as a part of factory overhead.

Variable Costing

Managers frequently use variable costing for internal purposes for taking decision making. The cost of goods manufactured includes direct materials, direct labor, and variable factory overhead. Fixed factory overhead treated as period (fixed) expense.

The income statement according to the absorption costing concept for June of Incorporation JI.

(b)

To determine

The income statement according to the variable costing concept for June of Incorporation JI.

(c)

To determine

To Identify: The reason for the difference between in income from operations for Absorption costing concept and variable costing concept.

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Chapter 6 Solutions

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