Absorption vs. Variable Costing Brindle Arts uses Variable Costing for internal purposes, but uses Absorption Costing for their financial reports. The following information is for Quarter 2 and Quarter 3 of 2020. Calculate unit product costs for Quarters 2 & 3 for Variable and Absorption Costing, prepare an income statement for each method, then show why there is a difference between the two. Selling price per unit 200 Quarter 2 Variable costs per unit Quarter 3 Units in beginning inventory Production (in units) Sales (in units) Ending inventory Direct materials Direct labor Variable overhead Variable S&A 3,000 65.00 15,000 7,500 $ 30.00 12,000 10,500 2$ 15.00 3,000 10.00 Fixed Costs in total Fixed manufacturing overhead Fixed selling & administrative $350,000 $200,000 Show the difference between variable costing NOI and absorption costing NOI. Variable Costing Compute the unit product costs for Quarters 2 & 3 Quarter 2 Quarter 3 Units in beginning inventory + units produced |- units sold = units in ending inventory Quarter 2 Quarter 3 Variable unit product cost Prepare an income statement for Quarters 2 & 3 FOH costs in ending inventory FOH in beg. inv. = FOH deferred in inventory or (released from inventory) Quarter 2 Quarter 3 Sales Variable expenses: Select one Select one Variable COGS Variable NOI Add: FOH deferred in inv. Less: FOH released from inv. Absorption costing NOI Variable S&A Total variable expenses Contribution Margin Fixed expenses: **Hint: be Fixed MOH Fixed S&A Total fixed expenses Net Operating Income

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Absorption vs. Variable

Absorption vs. Variable Costing
Brindle Arts uses Variable Costing for internal purposes, but uses Absorption Costing for their financial
reports. The following information is for Quarter 2 and Quarter 3 of 2020.
Calculate unit product costs for Quarters 2 & 3 for Variable and Absorption Costing, prepare an
income statement for each method, then show why there is a difference between the two.
Selling price per unit
200
Quarter 2
Quarter 3
Variable costs per unit
Units in beginning inventory
Production (in units)
Sales (in units)
Ending inventory
Direct materials
Direct labor
Variable overhead
3,000
$
65.00
15,000
7,500
30.00
12,000
10,500
15.00
3,000
Variable S&A
10.00
Fixed Costs in total
Fixed manufacturing overhead
Fixed selling & administrative
$350,000
$200,000
Show the difference between variable costing NOI and
absorption costing NOI.
Variable Costing
Compute the unit product costs for Quarters 2 & 3
Quarter 2
Quarter 3
Units in beginning inventory
Quarter 2
Quarter 3
+ units produced
Variable unit product cost
- units sold
= units in ending inventory
Prepare an income statement for Quarters 2 & 3
FOH costs in ending inventory
Quarter 2
Quarter 3
- FOH in beg. inv.
= FOH deferred in inventory
or (released from inventory)
Sales
Variable expenses:
Select one
Select one
Variable COGS
Variable NOI
Add: FOH deferred in inv.
Less: FOH released from inv.
Variable S&A
Total variable expenses
Contribution Margin
Fixed expenses:
**Hint: be careful of signs
Absorption costing NOI
Fixed MOH
Fixed S&A
Total fixed expenses
Net Operating Income
Transcribed Image Text:Absorption vs. Variable Costing Brindle Arts uses Variable Costing for internal purposes, but uses Absorption Costing for their financial reports. The following information is for Quarter 2 and Quarter 3 of 2020. Calculate unit product costs for Quarters 2 & 3 for Variable and Absorption Costing, prepare an income statement for each method, then show why there is a difference between the two. Selling price per unit 200 Quarter 2 Quarter 3 Variable costs per unit Units in beginning inventory Production (in units) Sales (in units) Ending inventory Direct materials Direct labor Variable overhead 3,000 $ 65.00 15,000 7,500 30.00 12,000 10,500 15.00 3,000 Variable S&A 10.00 Fixed Costs in total Fixed manufacturing overhead Fixed selling & administrative $350,000 $200,000 Show the difference between variable costing NOI and absorption costing NOI. Variable Costing Compute the unit product costs for Quarters 2 & 3 Quarter 2 Quarter 3 Units in beginning inventory Quarter 2 Quarter 3 + units produced Variable unit product cost - units sold = units in ending inventory Prepare an income statement for Quarters 2 & 3 FOH costs in ending inventory Quarter 2 Quarter 3 - FOH in beg. inv. = FOH deferred in inventory or (released from inventory) Sales Variable expenses: Select one Select one Variable COGS Variable NOI Add: FOH deferred in inv. Less: FOH released from inv. Variable S&A Total variable expenses Contribution Margin Fixed expenses: **Hint: be careful of signs Absorption costing NOI Fixed MOH Fixed S&A Total fixed expenses Net Operating Income
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