T3-7 Variable costing versus absorption costing (LO 1, 2) The following data were prepared by the Waco Wagon Company. Total Variable Fixed Sales price $20/unit Direct materials used $ 90,000 Direct labor $ 99,000 Manufacturing overhead $ 90,000 $ 9,000 $81,000 Selling and administrative expense $ 23,000 $14,000 $ 9,000 Units manufactured 18,000 units Beginning Finished Goods Inventory 20,000 units Ending Finished Goods Inventory 24,000 units Required a.Under absorption costing, what is the unit product cost? b.Under variable costing, what is the unit product cost? c.Under absorption costing, what is the cost of goods sold? d.Under variable costing, what is the cost of goods sold? e.Under absorption costing, what is the operating income? f.Under variable costing, what is the operating income? g.Reconcile the difference in operating income under absorption costing versus variable 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.
T3-7 Variable costing versus absorption costing (LO 1, 2) The following data were prepared by the Waco Wagon Company.
|
|
Total
|
Variable
|
Fixed
|
| Sales price |
$20/unit
|
||
| Direct materials used |
$ 90,000
|
||
| Direct labor |
$ 99,000
|
||
| Manufacturing overhead |
$ 90,000
|
$ 9,000
|
$81,000
|
| Selling and administrative expense |
$ 23,000
|
$14,000
|
$ 9,000
|
| Units manufactured |
18,000 units
|
||
| Beginning Finished Goods Inventory |
20,000 units
|
||
| Ending Finished Goods Inventory |
24,000 units
|
Required
a.Under absorption costing, what is the unit product cost?
b.Under variable costing, what is the unit product cost?
c.Under absorption costing, what is the cost of goods sold?
d.Under variable costing, what is the cost of goods sold?
e.Under absorption costing, what is the operating income?
f.Under variable costing, what is the operating income?
g.Reconcile the difference in operating income under absorption costing versus variable costing.
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