Please advise and provided example: ACC 206

As presented in Chapter 21, there are two methods of determining product cost: the absorption costing method and the variable costing method.

• Explain how costs are calculated using both methods.
• Which method is required by the generally accepted accounting principles (GAAP)?
• Develop an example in columnar format that compares the two methods of cost calculation using the following table:

The unit product cost of the company is computed as follows:

Absorption costing

Variable costing

Direct materials

Direct labor

Variable manufacturing overhead

Fixed manufacturing overhead

Total unit cost