what is different line items on a Variable Costing Income Statement vs Absorption Costing Income Statement?
Answer: | Variable costing is also know as marginal costing. Under this only variable cost are allocated to units produced and fixed manufacturing cost is charged against revenue. | ||
Income statement as per variable costing | |||
Sales | XXX | ||
Less | Variable production cost | XXX | |
Less | Variable selling and administrative cost | XXX | XXX |
Contribuion margin | XXX | ||
Less | Fixed manufacturing overheads | XXX | |
Less | Fixed selling & administraton cost | XXX | XXX |
Net income | XXX | ||
Under absorption costing, both fixed and variable cost are allocated to each unit produced. | |||
Income statement as per absorption costing | |||
Sales | XXX | ||
Less: | Variable production cost | XXX | |
Less: | Fixed manufacturing overheads | XXX | XXX |
Gross profit | XXX | ||
Less: | Variable selling and administrative cost | XXX | |
Less: | Fixed selling & administraton cost | XXX | XXX |
Net income | XXX |
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