Explain How Variable Costing Net Income Will Be Different Than

question 75

Essay

Explain how variable costing net income will be different than absorption costing net income under the following situations:?
(1) A company had no beginning or ending inventory. During the year, it produced and sold 10,000 units.?
(2) A company had no beginning inventory. During the year, it produced 10,000 units and sold 8,000 units.?
(3) A company had 2,000 units in beginning inventory. During the year, it produced 10,000 units and sold 12,000units.

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Definitions:

Actual Costs

The real, total expenses incurred during the production or acquisition of goods and services.

Fixed Overhead

Fixed costs that do not vary with the level of production or sales over a short term, including rental expenses, salaries, and insurance.

Direct Materials Price Variance

This refers to the difference between the actual cost of direct materials and the standard cost that was expected or budgeted for those materials.

Standard Price

The predetermined cost that a company expects to pay for various materials, labor, or overhead used in their products or services.