Sales (40,000 x $90) Manufacturing costs (40,000 units): $3,600,000 1,440,000 480,000 Direct materials.. Direct labor.... Variable factory overhead.. Fixed factory overhead... Fixed selling and administrative expenses.. Variable selling and administrative expenses.. 240,000 120,000 .......... 75,000 200,000 ....
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.
Estimated income statements, using absorption and variable costing
Prior to the first month of operations ending October 31, Marshall Inc.
estimated the attached operating results:
The company is evaluating a proposal to manufacture 50,000 units
instead of 40,000 units, thus creating an ending inventory of 10,000 units.
Manufacturing the additional units will not change sales, unit variable
and administrative expenses.
a. Prepare an estimated income statement, comparing operating
results if 40,000 and 50,000 units are manufactured in (1) the
absorption costing format and (2) the variable costing format.
b. What is the reason for the difference in operating income
reported for the two levels of production by the absorption costing
income statement?
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