Question

what is different line items on a Variable Costing Income Statement vs Absorption Costing Income Statement?

what is different line items on a Variable Costing Income Statement vs Absorption Costing Income Statement?

Homework Answers

Answer #1
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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