Concept explainers
1.
Variable Costing
Variable costing is the method that is used by the management (managers) for decision making purposes. The cost of goods manufactured includes direct materials, direct labor, and variable factory overhead. Fixed factory overhead is treated as period (fixed) expense.
Contribution Margin
Contribution margin is the excess of manufacturing margin above selling and administrative expenses. Contribution margin is calculated by deducting the variable cost from sales or deducting variable selling and administrative expenses from manufacturing margin.
The income statement according to the variable costing concept of the Company V for the year ended June 30, 20Y9.
2.
The amount by which total annual income from operations would be reduced below its presented level if the proposal 2 is accepted.
3.
To prepare: An income statement in the variable costing format, and indicating the projected annual income from operations if Proposal 3 is accepted.
4.
The value of total annual income increase above its present level if Proposal 3 is accepted.
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