March 1st
Wednesday, March 1, 2017 9:15 AM
Continued:
• Absorption costing is required by the sec(all manufacturing costs are product cost)
• If units sold = units produced the absorption N.I. will equal variable cost Net income
• If units sold < units produced > absorption costing N.I. > variable cost net income
• If units sold > units produced > absorption costing N.I. < variable cost net income
• Ricky:
○ PRICE $60
○ Varaible cost $35
○ DM $25
○ Dl $15
VMOH $5
○
○ VSG&A 2
○ Fixed cost:
§ MOH $250,000/yr
§ SG&A $80,000/yr
---- Yr 1 Yr2
Beg 0 $10,000
○ Produced 50,000 40,000
Sold 40,000 50,000
End 10,000 0
○ Q1) what is the product cost under variable costing each year
--- Y1 Y2
Dm 25 25
§ Dl 15 15
Moh 5 5
Total 45 45
○ Q2) what is the product cost uabsorptioncosting each year
---- Y1 Y2
DM 25 25
DL 15 15
§ March 1st
Wednesday, March 1, 2017 9:15 AM
Continued:
• Absorption costing is required by the sec(all manufacturing costs are product cost)
• If units sold = units produced the absorption N.I. will equal variable cost Net income
• If units sold < units produced > absorption costing N.I. > variable cost net income
• If units sold > units produced > absorption costing N.I. < variable cost net income
• Ricky:
○ PRICE $60
○ Varaible cost $35
○ DM $25
○ Dl $15
VMOH $5
○
○ VSG&A 2
○ Fixed cost:
§ MOH $250,000/yr
§ SG&A $80,000/yr
---- Yr 1 Yr2
Beg 0 $10,000
○ Produced 50,000 40,000
Sold 40,000 50,000
End 10,000 0
○ Q1) what is the product cost under variable costing each year
--- Y1 Y2
Dm 25 25
§ Dl 15 15
Moh 5 5
Total 45 45
○ Q2) what is the product cost uabsorptioncosting each year
---- Y1 Y2
DM 25 25
DL 15 15
§ ○ Q2) what is the product cost uabsorptioncosting each year
---- Y1 Y2
DM 25 25
DL 15 15
§
VMOH 5 5
FMOH 250,000/50,000=5 250,000/40,000=6.25
Total: 25+15+5+5=50 25+15+5+ 6.25=51.25
Q3) Create an income statement under variable costing
○
---- Y1 Y2
Sales 2400k 3000k
Variable Expenses1800+80=1880k 2250+100=2350 k
Cogs/product
SG&A

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