Exercise-2 (Variable costing income statement, Reconciliation of net operating income)
Posted in: Variable and absorption costing (exercises)
The following is the absorption costing income statement of Alpha Manufacturing Company for the year ended December 31, 2016:
Fixed selling and administrative expenses are $600,000. Variable selling and administrative expenses are $6 per unit sold. The unit product cost under absorption costing is computed as follows:
Required:
- Prepare an income statement of Alpha Manufacturing Company using variable costing system.
- Reconcile any difference in net operating income figure under variable costing system and under absorption costing system.
Solution
(1). Variable costing income statement:
(2) Reconciliation of net operating income:
7 Comments on Exercise-2 (Variable costing income statement, Reconciliation of net operating income)
how do we deal with opening inventory
you have a workings mistake, your net profit under absorption costing equals 180,000 not 100,000
what’s the work of prime cost per unit.
Plinseag to find someone who can think like that
Gross contribution margin and gross contribution margin should the two be really separated?
WELL UNDERSTOOD
how “selling and administrative expenses = 840,000” in the income statement under the absorption method in the above example.
Kindly clear.
Regards