SlideShare ist ein Scribd-Unternehmen logo
1 von 2
1.Prepare an income statement based on the absorption costing concept.
2. Prepare an income statement based on the variable costing concept.
Describe how ?
Solution
I am giving an example from a source mentioned:
http://www.accountingformanagement.org/exercise-2-vaac/
Suppose income and cost data is given
AGA company manufactures and sells a product for $20/Kg. The data for the last year is given
below:
Let us prepare Absorbtion costing
(a) Absorption costing:
80,000Kg
Analysis of absorption costing
(b)Variable costing:
There is differnce in net income of variable cost and absorbtion costing due to change in
treatment of fixed overheads. In absorbtion costing fixed over heads are prorated over the
quantity of goods sold, where as variable costing fixed costs are seperate and taken as whole for
the entire period
Thus if production quantity is greater than sold quantity, net profit will be more in absorbtion
costing campared to variable costing
Sales 75,000 Kg
Finished goods inventory at the beginning of the
period
12,000 Kg
Finished goods inventory at the closing of the period 17,000 Kg
Manufacturing costs:
Variable cost $8 per Kg
Fixed manufacturing overhead cost
$320,000 per
year
Marketing and administrative expenses:
Variable expenses $2 per Kg of sale
Fixed expenses
$300,000 per
year

Weitere ähnliche Inhalte

Ähnlich wie 1-Prepare an income statement based on the absorption costing concept-.docx

Variable & absorption costing
Variable & absorption costingVariable & absorption costing
Variable & absorption costing
Ikram khan
 
CIA1002 Lecture Inventories Part 2 Sem 2022 23 (3).pptx
CIA1002 Lecture Inventories Part 2 Sem 2022 23 (3).pptxCIA1002 Lecture Inventories Part 2 Sem 2022 23 (3).pptx
CIA1002 Lecture Inventories Part 2 Sem 2022 23 (3).pptx
Vasundhra22
 

Ähnlich wie 1-Prepare an income statement based on the absorption costing concept-.docx (18)

Variance Analysis.pptx
 Variance Analysis.pptx Variance Analysis.pptx
Variance Analysis.pptx
 
Processes and technologies
Processes and technologiesProcesses and technologies
Processes and technologies
 
Variable & absorption costing
Variable & absorption costingVariable & absorption costing
Variable & absorption costing
 
Marginal and absorption costing zimsec zimbabwe cambridge
Marginal and absorption costing zimsec zimbabwe cambridgeMarginal and absorption costing zimsec zimbabwe cambridge
Marginal and absorption costing zimsec zimbabwe cambridge
 
Marginal and absorption costing
Marginal and absorption costingMarginal and absorption costing
Marginal and absorption costing
 
Finac1 compilation 1
Finac1 compilation 1Finac1 compilation 1
Finac1 compilation 1
 
The Changing Role of Managerial Accounting in a GLOBAL Business Environment
The Changing Role of Managerial Accounting in a GLOBAL Business EnvironmentThe Changing Role of Managerial Accounting in a GLOBAL Business Environment
The Changing Role of Managerial Accounting in a GLOBAL Business Environment
 
CH4.pptx best power point for accounting students
CH4.pptx best power point for accounting studentsCH4.pptx best power point for accounting students
CH4.pptx best power point for accounting students
 
Acc 400 final examination answers
Acc 400 final examination answersAcc 400 final examination answers
Acc 400 final examination answers
 
Acc 400 final examination answers
Acc 400 final examination answersAcc 400 final examination answers
Acc 400 final examination answers
 
Ch07 cma
Ch07  cmaCh07  cma
Ch07 cma
 
F5 Revision D08
F5 Revision D08F5 Revision D08
F5 Revision D08
 
Absorption costing vs variable costing
Absorption costing  vs variable costingAbsorption costing  vs variable costing
Absorption costing vs variable costing
 
Chapter 9.pptx
Chapter 9.pptxChapter 9.pptx
Chapter 9.pptx
 
Management information may jun 2016 Knowledge Level Question ICAB
Management information may jun 2016 Knowledge Level Question ICAB Management information may jun 2016 Knowledge Level Question ICAB
Management information may jun 2016 Knowledge Level Question ICAB
 
Ma
MaMa
Ma
 
CIA1002 Lecture Inventories Part 2 Sem 2022 23 (3).pptx
CIA1002 Lecture Inventories Part 2 Sem 2022 23 (3).pptxCIA1002 Lecture Inventories Part 2 Sem 2022 23 (3).pptx
CIA1002 Lecture Inventories Part 2 Sem 2022 23 (3).pptx
 
Activity based costing
Activity based costingActivity based costing
Activity based costing
 

Mehr von todd991

14- Which of the following is the correct name for NalICO- A- Sodiuns.docx
14- Which of the following is the correct name for NalICO- A- Sodiuns.docx14- Which of the following is the correct name for NalICO- A- Sodiuns.docx
14- Which of the following is the correct name for NalICO- A- Sodiuns.docx
todd991
 
12-19 Notes Compare and contrast the Hubble Space Telescope with James.docx
12-19 Notes Compare and contrast the Hubble Space Telescope with James.docx12-19 Notes Compare and contrast the Hubble Space Telescope with James.docx
12-19 Notes Compare and contrast the Hubble Space Telescope with James.docx
todd991
 
12-5 Distribution of Cash Upon Liquidation Manley and Singh are partne.docx
12-5 Distribution of Cash Upon Liquidation Manley and Singh are partne.docx12-5 Distribution of Cash Upon Liquidation Manley and Singh are partne.docx
12-5 Distribution of Cash Upon Liquidation Manley and Singh are partne.docx
todd991
 
10- Consider the following data structure used for implementing a link.docx
10- Consider the following data structure used for implementing a link.docx10- Consider the following data structure used for implementing a link.docx
10- Consider the following data structure used for implementing a link.docx
todd991
 
10 Solution#include-iostream-h- #include-conio-h- #include-process-h-.docx
10 Solution#include-iostream-h- #include-conio-h- #include-process-h-.docx10 Solution#include-iostream-h- #include-conio-h- #include-process-h-.docx
10 Solution#include-iostream-h- #include-conio-h- #include-process-h-.docx
todd991
 
1-What are the consequences of long term unemployment- 2-Should the go.docx
1-What are the consequences of long term unemployment- 2-Should the go.docx1-What are the consequences of long term unemployment- 2-Should the go.docx
1-What are the consequences of long term unemployment- 2-Should the go.docx
todd991
 
1-The fund financial statements for governmental funds should include.docx
1-The fund financial statements for governmental funds should include.docx1-The fund financial statements for governmental funds should include.docx
1-The fund financial statements for governmental funds should include.docx
todd991
 
1-To a young researcher- what are the advantages of using the method o.docx
1-To a young researcher- what are the advantages of using the method o.docx1-To a young researcher- what are the advantages of using the method o.docx
1-To a young researcher- what are the advantages of using the method o.docx
todd991
 
1-Consider an organization with which you have been affiliated as an e.docx
1-Consider an organization with which you have been affiliated as an e.docx1-Consider an organization with which you have been affiliated as an e.docx
1-Consider an organization with which you have been affiliated as an e.docx
todd991
 
1-Astronomers estimate that a low-mass red dwarf star like Proxima Cen.docx
1-Astronomers estimate that a low-mass red dwarf star like Proxima Cen.docx1-Astronomers estimate that a low-mass red dwarf star like Proxima Cen.docx
1-Astronomers estimate that a low-mass red dwarf star like Proxima Cen.docx
todd991
 
1-a Which of TCP or UDP is connection-less- Which of TCP or UDP is con.docx
1-a Which of TCP or UDP is connection-less- Which of TCP or UDP is con.docx1-a Which of TCP or UDP is connection-less- Which of TCP or UDP is con.docx
1-a Which of TCP or UDP is connection-less- Which of TCP or UDP is con.docx
todd991
 
1- You align 2 lenses together with known focal lengths fi and fa- The.docx
1- You align 2 lenses together with known focal lengths fi and fa- The.docx1- You align 2 lenses together with known focal lengths fi and fa- The.docx
1- You align 2 lenses together with known focal lengths fi and fa- The.docx
todd991
 
1- What were some of the major work published by Thomas Maithus- emplo.docx
1- What were some of the major work published by Thomas Maithus- emplo.docx1- What were some of the major work published by Thomas Maithus- emplo.docx
1- What were some of the major work published by Thomas Maithus- emplo.docx
todd991
 
1- What are the advantages and disadvantages of each of sociologys mai.docx
1- What are the advantages and disadvantages of each of sociologys mai.docx1- What are the advantages and disadvantages of each of sociologys mai.docx
1- What are the advantages and disadvantages of each of sociologys mai.docx
todd991
 
1- What are the three fundamental elements of an effective security pr.docx
1- What are the three fundamental elements of an effective security pr.docx1- What are the three fundamental elements of an effective security pr.docx
1- What are the three fundamental elements of an effective security pr.docx
todd991
 
1- What are the various theories that we use to explain why people com.docx
1- What are the various theories that we use to explain why people com.docx1- What are the various theories that we use to explain why people com.docx
1- What are the various theories that we use to explain why people com.docx
todd991
 
1- Return the names- IDS- and average salary of the top 10 employees w.docx
1- Return the names- IDS- and average salary of the top 10 employees w.docx1- Return the names- IDS- and average salary of the top 10 employees w.docx
1- Return the names- IDS- and average salary of the top 10 employees w.docx
todd991
 

Mehr von todd991 (20)

14- Which of the following is the correct name for NalICO- A- Sodiuns.docx
14- Which of the following is the correct name for NalICO- A- Sodiuns.docx14- Which of the following is the correct name for NalICO- A- Sodiuns.docx
14- Which of the following is the correct name for NalICO- A- Sodiuns.docx
 
14 Income tax is estimated at 40- of income- What factors other than e.docx
14 Income tax is estimated at 40- of income- What factors other than e.docx14 Income tax is estimated at 40- of income- What factors other than e.docx
14 Income tax is estimated at 40- of income- What factors other than e.docx
 
12-19 Notes Compare and contrast the Hubble Space Telescope with James.docx
12-19 Notes Compare and contrast the Hubble Space Telescope with James.docx12-19 Notes Compare and contrast the Hubble Space Telescope with James.docx
12-19 Notes Compare and contrast the Hubble Space Telescope with James.docx
 
12-5 Distribution of Cash Upon Liquidation Manley and Singh are partne.docx
12-5 Distribution of Cash Upon Liquidation Manley and Singh are partne.docx12-5 Distribution of Cash Upon Liquidation Manley and Singh are partne.docx
12-5 Distribution of Cash Upon Liquidation Manley and Singh are partne.docx
 
10- Consider the following data structure used for implementing a link.docx
10- Consider the following data structure used for implementing a link.docx10- Consider the following data structure used for implementing a link.docx
10- Consider the following data structure used for implementing a link.docx
 
10 Solution#include-iostream-h- #include-conio-h- #include-process-h-.docx
10 Solution#include-iostream-h- #include-conio-h- #include-process-h-.docx10 Solution#include-iostream-h- #include-conio-h- #include-process-h-.docx
10 Solution#include-iostream-h- #include-conio-h- #include-process-h-.docx
 
1-What are the consequences of long term unemployment- 2-Should the go.docx
1-What are the consequences of long term unemployment- 2-Should the go.docx1-What are the consequences of long term unemployment- 2-Should the go.docx
1-What are the consequences of long term unemployment- 2-Should the go.docx
 
1-What is the conjugate base of H2C2O4- 2-Which of the following acid.docx
1-What is the conjugate base of H2C2O4-  2-Which of the following acid.docx1-What is the conjugate base of H2C2O4-  2-Which of the following acid.docx
1-What is the conjugate base of H2C2O4- 2-Which of the following acid.docx
 
1-The fund financial statements for governmental funds should include.docx
1-The fund financial statements for governmental funds should include.docx1-The fund financial statements for governmental funds should include.docx
1-The fund financial statements for governmental funds should include.docx
 
1-To a young researcher- what are the advantages of using the method o.docx
1-To a young researcher- what are the advantages of using the method o.docx1-To a young researcher- what are the advantages of using the method o.docx
1-To a young researcher- what are the advantages of using the method o.docx
 
1-The party to receive a distribution of principal from an estate is l.docx
1-The party to receive a distribution of principal from an estate is l.docx1-The party to receive a distribution of principal from an estate is l.docx
1-The party to receive a distribution of principal from an estate is l.docx
 
1-Consider an organization with which you have been affiliated as an e.docx
1-Consider an organization with which you have been affiliated as an e.docx1-Consider an organization with which you have been affiliated as an e.docx
1-Consider an organization with which you have been affiliated as an e.docx
 
1-Astronomers estimate that a low-mass red dwarf star like Proxima Cen.docx
1-Astronomers estimate that a low-mass red dwarf star like Proxima Cen.docx1-Astronomers estimate that a low-mass red dwarf star like Proxima Cen.docx
1-Astronomers estimate that a low-mass red dwarf star like Proxima Cen.docx
 
1-a Which of TCP or UDP is connection-less- Which of TCP or UDP is con.docx
1-a Which of TCP or UDP is connection-less- Which of TCP or UDP is con.docx1-a Which of TCP or UDP is connection-less- Which of TCP or UDP is con.docx
1-a Which of TCP or UDP is connection-less- Which of TCP or UDP is con.docx
 
1- You align 2 lenses together with known focal lengths fi and fa- The.docx
1- You align 2 lenses together with known focal lengths fi and fa- The.docx1- You align 2 lenses together with known focal lengths fi and fa- The.docx
1- You align 2 lenses together with known focal lengths fi and fa- The.docx
 
1- What were some of the major work published by Thomas Maithus- emplo.docx
1- What were some of the major work published by Thomas Maithus- emplo.docx1- What were some of the major work published by Thomas Maithus- emplo.docx
1- What were some of the major work published by Thomas Maithus- emplo.docx
 
1- What are the advantages and disadvantages of each of sociologys mai.docx
1- What are the advantages and disadvantages of each of sociologys mai.docx1- What are the advantages and disadvantages of each of sociologys mai.docx
1- What are the advantages and disadvantages of each of sociologys mai.docx
 
1- What are the three fundamental elements of an effective security pr.docx
1- What are the three fundamental elements of an effective security pr.docx1- What are the three fundamental elements of an effective security pr.docx
1- What are the three fundamental elements of an effective security pr.docx
 
1- What are the various theories that we use to explain why people com.docx
1- What are the various theories that we use to explain why people com.docx1- What are the various theories that we use to explain why people com.docx
1- What are the various theories that we use to explain why people com.docx
 
1- Return the names- IDS- and average salary of the top 10 employees w.docx
1- Return the names- IDS- and average salary of the top 10 employees w.docx1- Return the names- IDS- and average salary of the top 10 employees w.docx
1- Return the names- IDS- and average salary of the top 10 employees w.docx
 

Kürzlich hochgeladen

Vishram Singh - Textbook of Anatomy Upper Limb and Thorax.. Volume 1 (1).pdf
Vishram Singh - Textbook of Anatomy  Upper Limb and Thorax.. Volume 1 (1).pdfVishram Singh - Textbook of Anatomy  Upper Limb and Thorax.. Volume 1 (1).pdf
Vishram Singh - Textbook of Anatomy Upper Limb and Thorax.. Volume 1 (1).pdf
ssuserdda66b
 
1029-Danh muc Sach Giao Khoa khoi 6.pdf
1029-Danh muc Sach Giao Khoa khoi  6.pdf1029-Danh muc Sach Giao Khoa khoi  6.pdf
1029-Danh muc Sach Giao Khoa khoi 6.pdf
QucHHunhnh
 
Activity 01 - Artificial Culture (1).pdf
Activity 01 - Artificial Culture (1).pdfActivity 01 - Artificial Culture (1).pdf
Activity 01 - Artificial Culture (1).pdf
ciinovamais
 
Spellings Wk 3 English CAPS CARES Please Practise
Spellings Wk 3 English CAPS CARES Please PractiseSpellings Wk 3 English CAPS CARES Please Practise
Spellings Wk 3 English CAPS CARES Please Practise
AnaAcapella
 

Kürzlich hochgeladen (20)

Vishram Singh - Textbook of Anatomy Upper Limb and Thorax.. Volume 1 (1).pdf
Vishram Singh - Textbook of Anatomy  Upper Limb and Thorax.. Volume 1 (1).pdfVishram Singh - Textbook of Anatomy  Upper Limb and Thorax.. Volume 1 (1).pdf
Vishram Singh - Textbook of Anatomy Upper Limb and Thorax.. Volume 1 (1).pdf
 
Holdier Curriculum Vitae (April 2024).pdf
Holdier Curriculum Vitae (April 2024).pdfHoldier Curriculum Vitae (April 2024).pdf
Holdier Curriculum Vitae (April 2024).pdf
 
General Principles of Intellectual Property: Concepts of Intellectual Proper...
General Principles of Intellectual Property: Concepts of Intellectual  Proper...General Principles of Intellectual Property: Concepts of Intellectual  Proper...
General Principles of Intellectual Property: Concepts of Intellectual Proper...
 
How to Create and Manage Wizard in Odoo 17
How to Create and Manage Wizard in Odoo 17How to Create and Manage Wizard in Odoo 17
How to Create and Manage Wizard in Odoo 17
 
1029-Danh muc Sach Giao Khoa khoi 6.pdf
1029-Danh muc Sach Giao Khoa khoi  6.pdf1029-Danh muc Sach Giao Khoa khoi  6.pdf
1029-Danh muc Sach Giao Khoa khoi 6.pdf
 
Towards a code of practice for AI in AT.pptx
Towards a code of practice for AI in AT.pptxTowards a code of practice for AI in AT.pptx
Towards a code of practice for AI in AT.pptx
 
Making communications land - Are they received and understood as intended? we...
Making communications land - Are they received and understood as intended? we...Making communications land - Are they received and understood as intended? we...
Making communications land - Are they received and understood as intended? we...
 
Kodo Millet PPT made by Ghanshyam bairwa college of Agriculture kumher bhara...
Kodo Millet  PPT made by Ghanshyam bairwa college of Agriculture kumher bhara...Kodo Millet  PPT made by Ghanshyam bairwa college of Agriculture kumher bhara...
Kodo Millet PPT made by Ghanshyam bairwa college of Agriculture kumher bhara...
 
HMCS Max Bernays Pre-Deployment Brief (May 2024).pptx
HMCS Max Bernays Pre-Deployment Brief (May 2024).pptxHMCS Max Bernays Pre-Deployment Brief (May 2024).pptx
HMCS Max Bernays Pre-Deployment Brief (May 2024).pptx
 
TỔNG ÔN TẬP THI VÀO LỚP 10 MÔN TIẾNG ANH NĂM HỌC 2023 - 2024 CÓ ĐÁP ÁN (NGỮ Â...
TỔNG ÔN TẬP THI VÀO LỚP 10 MÔN TIẾNG ANH NĂM HỌC 2023 - 2024 CÓ ĐÁP ÁN (NGỮ Â...TỔNG ÔN TẬP THI VÀO LỚP 10 MÔN TIẾNG ANH NĂM HỌC 2023 - 2024 CÓ ĐÁP ÁN (NGỮ Â...
TỔNG ÔN TẬP THI VÀO LỚP 10 MÔN TIẾNG ANH NĂM HỌC 2023 - 2024 CÓ ĐÁP ÁN (NGỮ Â...
 
Activity 01 - Artificial Culture (1).pdf
Activity 01 - Artificial Culture (1).pdfActivity 01 - Artificial Culture (1).pdf
Activity 01 - Artificial Culture (1).pdf
 
ICT role in 21st century education and it's challenges.
ICT role in 21st century education and it's challenges.ICT role in 21st century education and it's challenges.
ICT role in 21st century education and it's challenges.
 
SKILL OF INTRODUCING THE LESSON MICRO SKILLS.pptx
SKILL OF INTRODUCING THE LESSON MICRO SKILLS.pptxSKILL OF INTRODUCING THE LESSON MICRO SKILLS.pptx
SKILL OF INTRODUCING THE LESSON MICRO SKILLS.pptx
 
Spellings Wk 3 English CAPS CARES Please Practise
Spellings Wk 3 English CAPS CARES Please PractiseSpellings Wk 3 English CAPS CARES Please Practise
Spellings Wk 3 English CAPS CARES Please Practise
 
Understanding Accommodations and Modifications
Understanding  Accommodations and ModificationsUnderstanding  Accommodations and Modifications
Understanding Accommodations and Modifications
 
This PowerPoint helps students to consider the concept of infinity.
This PowerPoint helps students to consider the concept of infinity.This PowerPoint helps students to consider the concept of infinity.
This PowerPoint helps students to consider the concept of infinity.
 
Accessible Digital Futures project (20/03/2024)
Accessible Digital Futures project (20/03/2024)Accessible Digital Futures project (20/03/2024)
Accessible Digital Futures project (20/03/2024)
 
Sociology 101 Demonstration of Learning Exhibit
Sociology 101 Demonstration of Learning ExhibitSociology 101 Demonstration of Learning Exhibit
Sociology 101 Demonstration of Learning Exhibit
 
Spatium Project Simulation student brief
Spatium Project Simulation student briefSpatium Project Simulation student brief
Spatium Project Simulation student brief
 
Google Gemini An AI Revolution in Education.pptx
Google Gemini An AI Revolution in Education.pptxGoogle Gemini An AI Revolution in Education.pptx
Google Gemini An AI Revolution in Education.pptx
 

1-Prepare an income statement based on the absorption costing concept-.docx

  • 1. 1.Prepare an income statement based on the absorption costing concept. 2. Prepare an income statement based on the variable costing concept. Describe how ? Solution I am giving an example from a source mentioned: http://www.accountingformanagement.org/exercise-2-vaac/ Suppose income and cost data is given AGA company manufactures and sells a product for $20/Kg. The data for the last year is given below: Let us prepare Absorbtion costing (a) Absorption costing: 80,000Kg Analysis of absorption costing (b)Variable costing: There is differnce in net income of variable cost and absorbtion costing due to change in treatment of fixed overheads. In absorbtion costing fixed over heads are prorated over the quantity of goods sold, where as variable costing fixed costs are seperate and taken as whole for the entire period Thus if production quantity is greater than sold quantity, net profit will be more in absorbtion costing campared to variable costing Sales 75,000 Kg
  • 2. Finished goods inventory at the beginning of the period 12,000 Kg Finished goods inventory at the closing of the period 17,000 Kg Manufacturing costs: Variable cost $8 per Kg Fixed manufacturing overhead cost $320,000 per year Marketing and administrative expenses: Variable expenses $2 per Kg of sale Fixed expenses $300,000 per year