Chapter 6.A, Problem 5P

To determine

(a)

Unit Product Cost and Income Statement under Super-Variable costing method.

Super-Variable Costing:

In this costing method, only direct materials are considered as unit product costs and all other expenses are treated as period costs and charged completely in the year of manufacture. This means that opening inventory and ending inventory is valued at only direct material cost.

To determine

(b)

Unit Product Cost and Income Statement under Variable costing method.

Variable Costing:

In this method of costing, all the variable manufacturing cost are treated as part of unit product cost i.e. direct material, direct labor and variable manufacturing overhead are included in unit product cost. Fixed overheads and selling expenses are treated as period cost. Here, opening inventory and the ending inventory is valued at variable cost of manufacturing.

To determine

(c)

Unit Product Cost and Income Statement under Absorption costing method.

Absorption Costing:

In this method of costing, all the manufacturing cost are treated as part of unit product cost i.e. direct material, direct labor, variable manufacturing overhead and fixed manufacturing overhead are included in unit product cost. Selling expenses are treated as period cost. Here, opening inventory and the ending inventory is valued at total cost of manufacturing.

To determine

(d)

Reconciliation of Net Operating Income between Super - Variable costing method and Variable costing method.

To determine

(e)

Reconciliation of Net Operating Income between Super - Variable costing method and Absorption costing method.