
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.
Absorption costing incomes from operations differ between plans to produce 10,000 units and plan to produce 15,000 units.
(b)
Variable costing incomes from operations differ between plans to produce 10,000 units and plan to produce 15,000 units.

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Chapter 6 Solutions
Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only
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