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    Variable and Absorption Costing (Accounting)

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    XYZ Company sells its razors at $8.00 per unit. The following data relates to its
    first year of operations.

    Sales 500 units
    Production 1,000 units

    Variable manufacturing $ 400
    Fixed manufacturing 800
    Variable selling 400
    Fixed selling 200

    a) Prepare an income statement based on variable costing.
    b) Prepare an income statement based on absorption costing.
    c) Provide all computations for each, example: Sales= Total Units Sold (500) x Price (8.00).

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    Solution Preview

    (a) Income Statement - Variable Costing

    Sales = Total Units Sold (500) * Sale Price (8) = $4,000
    Variable Manufacturing (VM)= $400
    Variable Selling (VS) = $400

    Contribution Margin (CM) = Sales (4000) - VM (400) - VS ...

    Solution Summary

    The solution provides Income Statement under both Variable Costing and Absorption Costing.