AC vs VC

Question 1

Variable Costing Product Cost

Answer 1

(DM + DL + VOH) per unit

Question 2

Absorption Costing Product Cost

Answer 2

(DM + DL + VOH + FOH) per unit

Question 3

VC income statement

Answer 3

Sales
Less: Variable Cost
- Beginning Inventory
- Add: COGM
- Less: Ending Inventory
- Variable Selling and Admin Cost
= Contribution Margin
Less: Fixed Expense
- Fixed overhead cost
- Fixed Selling and admin cost
= NOI

Question 4

AC Income statement

Answer 4

Sales
Less: COGS
- Beginning Inventory
- Add: COGM
- Less: Ending Inventory
= Gross Margin
Less: Selling and Admin Cost
- Variable Selling and Admin Cost
- Fixed Selling and Admin Cost
= NOI

Question 5

Reconciliation

Answer 5

Change in Inventory x FOHR

Question 6

Production > Selling

Answer 6

AC NOI > VC NOI

Some of the FOH is inventorised by the unsold products and is deferred to another month (AC)

Question 7

Production < Selling

Answer 7

VC NOI > AC NOI

the FOH that was deferred is released (AC)

Question 8

Applied Overhead

Answer 8

POHR x Actual base

Question 9

Overapplied OH

Answer 9

Cr COGS; NOI increases

Question 10

Underapplied OH

Answer 10

Dr COGS; NOI decreases