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Chapter 21: Q1SE (page 1167)

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

  1. Direct materials
  2. Direct labor
  3. Variable manufacturing overhead
  4. Fixed manufacturing overhead
  5. Variable selling and administrative costs
  6. Fixed selling and administrative cost

Short Answer

Expert verified

Answer

The classification of cost is given in the table below.

Step by step solution

01

Absorption costing Vs. Variable costing

Absorption costing absorbs all manufacturing costs including fixed manufacturing overheads. Variable costing only allocates variable costs to the product, fixed manufacturing overhead is classified as a period cost under variable costing.

02

Classification of cost

Absorption Costing

Variable Costing

Product Cost

Period Cost

Product Cost

Period Cost

a. Direct materials

X

X

b. Direct labor

X

X

c. Variable manufacturing overhead

X

X

d. Fixed manufacturing overhead

X

X

e. Variable selling and administrative costs

X

X

f. Fixed selling and administrative cost

X

X

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Most popular questions from this chapter

Using absorption and variable costing

Meyer Company reports the following information for March:

Net Sales Revenue $ 45,300

Variable Cost of Goods Sold 12,500

Fixed Cost of Goods Sold 11,800

Variable Selling and Administrative Costs 14,000

Fixed Selling and Administrative Costs 5,400

Requirements:

  1. Calculate the gross profit and operating income for March using absorption costing.
  2. Calculate the contribution margin and operating income for March using variable costing.

Question:What is a business segment? Give some examples.

Computing absorption cost per unit and variable cost per unit

Adamson, Inc. has the following cost data for Product X:

Direct materials $ 41 per unit Direct labor 57 per unit Variable manufacturing overhead 7 per unit Fixed manufacturing overhead 20,000 per year

Calculate the unit product cost using absorption costing and variable costing when production is 2,000 units, 2,500 units, and 5,000 units.

In the long run, all costs are controllable. Is this statement true? Why or why not?

Preparing variable and absorption costing income statements

Claudia’s Foods produces frozen meals that it sells for \(11 each. The company computes a new monthly fixed manufacturing overhead allocation rate based on the planned number of meals to be produced that month. Assume all costs and production levels are exactly as planned. The following data are from Linda’s Foods’s first month in business:

January 2018 Units produced and sold: Sales 850 meals Production 1,050 meals Variable manufacturing cost per meal \) 5Sales commission cost per meal 1 Total fixed manufacturing overhead 315Total fixed selling and administrative costs 450 Requirements

1. Compute the product cost per meal produced under absorption costing and under variable costing.

2. Prepare income statements for January 2018 using: a. absorption costing. b. variable costing.

3. Is operating income higher under absorption costing or variable costing in January?
See all solutions

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