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Full costing and variable costing

Company A produced 80,000 units and sold 75,000 units at a price of $20 per unit.
Direct materials cost 200,000; direct labor 320,000; overhead 160,000; fixed manufacturing overhead 400,000; administrative costs 60,000.

Calculate net income using full costing and calculate net income using variable costing.

Solution Preview

Company A produced 80,000 units and sold 75,000 units at a price of $20 per unit.
Direct materials cost 200,000;  direct labor 320,000; overhead 160,000; fixed manufacturing overhead 400,000; administrative costs 60,000.

Calculate net income using full costing and calculate net income using variable costing.

The basic difference between absorption (full costing) and variable costing is the treatment of fixed manufacturing overhead. Absorption costing treats fixed overhead as a product cost while variable costing treats fixed overhead as a period cost.

Selling and administrative expenses are considered ...

Solution Summary

Calculates net income using full costing and variable costing.

$2.19