Chapter 21: Q-21-1RQ (page 1166)
What is absorption costing?
Short Answer
Answer
Absorption costing is the traditional method of calculating product cost per unit.
Chapter 21: Q-21-1RQ (page 1166)
What is absorption costing?
Answer
Absorption costing is the traditional method of calculating product cost per unit.
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Get started for freeQuestion: Preparing variable costing income statements, production less than sales
Refer to your answers to Exercise E21-16. In May 2018, ReVitalAde produced 22,000 cases of powdered drink mix and sold 23,000 cases, of which 1,000 were produced in April. The sales price was \(29, variable costs were \)12 per case (\(9 manufacturing and \)3 selling and administrative), and total fixed costs were \(100,000 (\)91,000 manufacturing and $9,000 selling and administrative).
Requirements
Classifying costs Classify each cost by placing an X in the appropriate columns. The first cost is completed as an example.
Absorption Costing Variable Costing Product Cost Period Cost Product Cost Period cost
The Stark Company manufactures a product that is expected to incur \(20 per unit in variable production costs and sell for \)40 per unit. The sales commission is 10% of the sales price. Due to intense competition, Stark actually sold 200 units for \(38 per unit. The actual variable production costs incurred were \)23.75 per unit. Calculate the total contribution margin and contribution margin ratio at the expected price/costs and the actual price/costs. How might management use this information?
What are the two components that can affect contribution margin? Why is it important to investigate both?
When units produced are less than units sold, how does operating income differ between variable costing and absorption costing? Why
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