Question

VSB 3006 – Dr. JME

Handout – Variable Costing

Below is data for the JME Company for September and October of 20X1. JME uses a FIFO cost assumption.

                                        September   October

Sales in units                   90                105

Production in units           100               100

Sales price per unit          $20              $20

Var Prod cost/unit           $4.00           $4.25

Fixed Prod cost                $110             $130

Var Period cost/unit        $3.00           $3.15

Fixed Period cost             $175            $200

REQUIRED - You are to compute income under absorption costing and variable costing. In addition, “justify” or explain any differences.

Answer 1

Construct The Absorption Costing Unit Product Cost
				Sep	Oct
Variable Manufacturing cost				4	4
Fixed Manufacturing cost				1.10	1.3
Absorption costing unit prroduct cost				5.10	5.3
Construct the Absorption Costing Income Statement Under FIFO
				Sep	Oct
Sales				$1,800	2100
Cost of Goods sold				459	556.5
Gross Margin				$1,341	1543.5
Selling and distribution expense				445	530.75
Net operating income				896	1012.75
Compute the Variable costing Unit Product cost
				Sep	Oct
Variable Manufacturing cost				4	4
Variable costing unit prroduct cost				4	4
Construct The Variable Costing Income Statement under FIFO
				Sep		Oct
Sales					1,800		2,100
Less: Variable cost
variable cost of goods sold				360		420
Variable selling expense				270	630	331	751
Contribution margin					1,170		1,349
Fixed expense:
Fixed Manufacturing overheads					110		130
Fixed selling expense					175		200
Net operating Income					885		1,019