Concept introduction:
Absorption costing:
The method of costing where both fixed and variable costs are charged to the products Absorption costing absorbs the costs which are directly related to the product. The fixed overheads are charged to all units manufactured regardless of the output.
Requirement 1:
Calculate the product cost by using the absorption costing and variable costing method.
Concept introduction:
Income statement:
The income statement tells about the revenues earned and expenses incurred by the company in a specific period of time. It is also known as operations statement, earnings statement, revenue statement or profit, and loss statement.
Requirement 2:
Prepare contribution format variable costing income statements for the given months.
Concept introduction:
Requirement 3:
Establish the relationship between the variable costing and absorption costing net operating income figures.
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