
Concept explainers
(a)
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
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)
The income statement according to the variable costing concept for June of Incorporation JI.
(c)
To Identify: The reason for the difference between in income from operations for Absorption costing concept and variable costing concept.

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