ACCT 210 1st Edition Lecture 8 Outline of Last Lecture I Review of previous material II POR III Recording overhead Outline of Current Lecture I Variable costing II Absorption costing III P S Current Lecture 1 Variable Costing a Product costs include i Direct labor ii Direct materials iii Variable manufacturing overhead b Period costs include i Fixed manufacturing overhead on income statement ii Selling costs iii Administrative costs c Variable Costing Income Statement Sales less Variable costs VC Contribution margin CM less Fixed costs FC Net income NI 2 Absorption costing a Product costs include i Direct labor ii Direct material iii Variable manufacturing overhead iv Fixed manufacturing overhead on balance sheet b Period costs include i Selling costs ii Administrative Costs c Absorption Costing Income Statement Sales S less Cost of goods sold COGS Gross Margin GM less Selling general administrative expenses SG A Net income NI 3 P S a Number of units produced number of units sold b Example Unit sales 400 000 at 5 unit Production is 400 000 Direct materials DM Direct labor DL Variable manufacturing overhead VMOH 1 25 unit VC of SG A 1 unit Fixed MOH 100 000 Fixed SG A 250 000 i Calculate per unit product cost 100 000 units produced DM DL VMOH FMOH absorption only Unit Cost Absorption Variable 1 25 0 25 1 50 1 25 1 25 ii Remember SG A expenses are always period costs and can be fixed or variable iii Variable cost income statement Sales VC VMOH SG A CM FC FMOH SG A NI 5 00 x 400 000 2 000 000 1 25 x 400 000 1 00 x 400 000 500 000 400 000 1 100 000 100 000 250 000 iv Absorption cost income statement 750 000 Sales COGS DM DL VMOH SG A GM SG A VC of SG A FC of SG A NI 2 000 000 1 25 x 400 000 0 25 x 400 000 500 000 100 000 1 400 000 1 00 x 400 000 250 000 400 000 750 000
View Full Document
Unlocking...