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9 - 3 2 Variable costing versus absorption costing. The Stenback Company uses an absorption - costing system based on standard costs. Variable manufacturing cost
Variable costing versus absorption costing. The Stenback Company uses an absorptioncosting system based on standard costs. Variable manufacturing cost consists of direct material cost of $ per unit and other variable manufacturing costs of $ per unit. The standard production rate is units per machinehour. Total budgeted and actual fixed manufacturing overhead costs are $ Fixed manufacturing overhead is allocated at $ per machinehour based on fixed manufacturing costs of $ machinehours, which is the level Stenback uses as its denominator level. The selling price is $ per unit. Variable operating nonmanufacturing cost which is driven by units sold, is $ per unit. Fixed operating nonmanufacturing costs are $ Beginning inventory in is units; ending inventory is units. Sales in are units. The same standard unit costs persisted throughout and For simplicity, assume that there are no price, spending, or efficiency variances. Prepare an income statement for assuming that the productionvolume variance is written off at yearend as an adjustment to cost of goods sold. The president has heard about variable costing. She asks you to recast the statement as it would appear under variable costing. Explain the difference in operating income as calculated in requirements and Critics have claimed that a widely used accounting system has led to undesirable buildups of inventory levels. a Is variable costing or absorption costing more likely to lead to such buildups? Why? b What can managers do to counteract undesirable inventory buildups?
Variable costing versus absorption costing. The Stenback Company uses an absorptioncosting system based on standard costs. Variable manufacturing cost consists of direct material cost of $ per unit and other variable manufacturing costs of $ per unit. The standard production rate is units per machinehour. Total budgeted and actual fixed manufacturing overhead costs are $ Fixed manufacturing overhead is allocated at $ per machinehour based on fixed manufacturing costs of $ machinehours, which is the level Stenback uses as its denominator level.
The selling price is $ per unit. Variable operating nonmanufacturing cost which is driven by units sold, is $ per unit. Fixed operating nonmanufacturing costs are $ Beginning inventory in is units; ending inventory is units. Sales in are units.
The same standard unit costs persisted throughout and For simplicity, assume that there are no price, spending, or efficiency variances.
Prepare an income statement for assuming that the productionvolume variance is written off at yearend as an adjustment to cost of goods sold.
The president has heard about variable costing. She asks you to recast the statement as it would appear under variable costing.
Explain the difference in operating income as calculated in requirements and
Critics have claimed that a widely used accounting system has led to undesirable buildups of inventory levels. a Is variable costing or absorption costing more likely to lead to such buildups? Why? b What can managers do to counteract undesirable inventory buildups?
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