Absorption and Variable Costing Income Statements During the first month of operations ended July 31, YoSan Inc. manufactured 11,300 flat panel televisions, of which 10,500 were sold. Operating data for the month are summarized as follows: Sales $1,837,500 Manufacturing costs: Direct materials $926,600 Direct labor 282,500 Variable manufacturing cost 237,300 Fixed manufacturing cost 124,300 1,570,700 Selling and administrative expenses: Variable $147,000 Fixed 67,600 214,600 Required: 1. Prepare an income statement based on the absorption costing concept. YoSan Inc.Absorption Costing Income StatementFor the Month Ended July 31 $Sales Cost of goods sold: $Cost of goods manufactured Inventory, July 31 Total cost of goods sold $- Select - - Select - $- Select - Feedback 1. Sales - (cost of goods manufactured - ending inventory*) = Gross profit; gross profit - selling and administrative expenses = operating income *(Manufactured Units - Sold units) x (total manufacturing costs/manufactured units) 2. Prepare an income statement based on the variable costing concept. YoSan Inc.Variable Costing Income StatementFor the Month Ended July 31 $- Select - Variable cost of goods sold: $- Select - - Select - - Select - $- Select - - Select - $- Select - Fixed costs: $- Select - - Select - - Select - $- Select - Feedback 2. Sales - variable cost of goods sold* = Manufacturing margin; Manufacturing margin - variable selling and administrative expenses = Contribution margin; Contribution margin - (fixed manufacturing costs + fixed selling and administrative expenses) = operating income *Variable cost of goods sold = Variable cost of goods manufactured - [(Manufactured Units - Sold units) x (variable manufacturing costs/manufactured units)] 3. Explain the reason for the difference in the amount of operating income reported in (1) and (2). The operating income reported under costing exceeds the operating income reported under costing, due to manufacturing costs that are deferred to a future month under costing.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Absorption and Variable Costing Income Statements
During the first month of operations ended July 31, YoSan Inc. manufactured 11,300 flat panel televisions, of which 10,500 were sold. Operating data for the month are summarized as follows:
| Sales | $1,837,500 | |
| Direct materials | $926,600 | |
| Direct labor | 282,500 | |
| Variable manufacturing cost | 237,300 | |
| Fixed manufacturing cost | 124,300 | 1,570,700 |
| Selling and administrative expenses: | ||
| Variable | $147,000 | |
| Fixed | 67,600 | 214,600 |
Required:
1. Prepare an income statement based on the absorption costing concept.
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$Sales | |
| Cost of goods sold: | ||
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$Cost of goods manufactured | |
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Inventory, July 31 | |
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Total cost of goods sold | |
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$- Select - | |
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- Select - | |
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$- Select - |
1. Sales - (cost of goods manufactured - ending inventory*) = Gross profit; gross profit - selling and administrative expenses = operating income
*(Manufactured Units - Sold units) x (total manufacturing costs/manufactured units)
2. Prepare an income statement based on the variable costing concept.
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$- Select - | |
| Variable cost of goods sold: | ||
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$- Select - | |
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- Select - | |
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- Select - | |
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$- Select - | |
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- Select - | |
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$- Select - | |
| Fixed costs: | ||
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$- Select - | |
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- Select - | |
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- Select - | |
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$- Select - |
2. Sales - variable cost of goods sold* = Manufacturing margin; Manufacturing margin - variable selling and administrative expenses = Contribution margin; Contribution margin - (fixed manufacturing costs + fixed selling and administrative expenses) = operating income
*Variable cost of goods sold = Variable cost of goods manufactured - [(Manufactured Units - Sold units) x (variable manufacturing costs/manufactured units)]
3. Explain the reason for the difference in the amount of operating income reported in (1) and (2).
The operating income reported under
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