Concept explainers
Concept Introduction:
Variable costing: Variable costing is one of the methods of calculation of product costs. Under this method, only the variable
Absorption costing: Absorption costing is one of the methods of calculation of product costs. Under this method, the fixed manufacturing overheads are also considered as part of the product cost with direct costs. The unit product cost includes direct material, direct labor, and variable overhead and allocated amount of fixed overhead. Under this method, the income statement calculates Gross margin and net operating income.
1. To prepare: The income statement using absorption costing method
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Horngren's Accounting: The Managerial Chapters (12th Edition) (loose Leaf Version)
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