Cost Accounting: A Managerial Emphasis, 15th Edition
Cost Accounting: A Managerial Emphasis, 15th Edition
15th Edition
ISBN: 9780133803815
Author: Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
Question
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Chapter 9, Problem 9.20E

1.

To determine

Variable Costing:

The variable costing is a method used to allocate the fixed manufacturing overhead by a company. It allocates these overheads to the period of production and not to the inventory left unsold or ending inventory.

Absorption Costing:

The absorption costing is a method used to allocate the fixed manufacturing overhead by a company. It allocates these overheads based on the inventory produced and inventory sold. It is based on the approach that the unsold inventory also consist some fixed manufacturing overhead incurred during a period.

Income Statement:

A part of periodical financial statements that reports the total earnings and expenses for a company or a unit of production is called income statement.

To prepare: The income statements for company T under variable costing and absorption costing method.

2.

To determine

To compute: The operating income percentage under both the costing methods.

3.

To determine

To explain: The difference in operating income under both the costing methods.

4.

To determine

To identify: The better costing method to be recommended to the CFO of company Z.

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Rivana Co. has a beginning receivables balance on March 1 of $1,280. Sales for March through June are $790, $860, $1,150, and $2,050, respectively. The accounts receivable period is 30 days. What is the amount of the May collections? Assume a year has 360 days.
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