SuperVariable Costing APPENDIX 6 A Power Point Authors
Super-Variable Costing APPENDIX 6 A Power. Point Authors: Susan Coomer Galbreath, Ph. D. , CPA Jon A. Booker, Ph. D. , CPA, CIA Cynthia J. Rooney, Ph. D. , CPA ©Mc. Graw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or fur distribution permitted without the prior written consent of Mc. Graw-Hill Education.
6 A-2 Learning Objective 6 Prepare an income statement using super-variable costing and reconcile this approach with variable costing. ©Mc. Graw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or fur distribution permitted without the prior written consent of Mc. Graw-Hill Education.
Overview of Variable and Super-Variable Costing 6 A-3 Super-variable costing classifies all direct labor and manufacturing overhead costs as fixed period costs and only direct materials as a variable product cost. To simplify, in this appendix we also assume that selling and administrative expenses are entirely fixed. Super. Variable Costing Product Costs Direct Materials Period Costs Fixed Manufacturing Overhead Product Cost Direct Labor Period Costs Fixed Selling and Administrative Expenses ©Mc. Graw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or fur distribution permitted without the prior written consent of Mc. Graw-Hill Education.
6 A-4 Unit Cost Computations – Part 1 Harvey Company produces a single product with the following information available: ©Mc. Graw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or fur distribution permitted without the prior written consent of Mc. Graw-Hill Education.
6 A-5 Unit Cost Computations – Part 2 Unit product cost is determined as follows: Under super-variable costing, only the direct material costs are included in product costs. Under variable costing, direct materials and direct labor are included when determining unit product cost. ©Mc. Graw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or fur distribution permitted without the prior written consent of Mc. Graw-Hill Education.
Variable and Super-Variable Costing Income Statements 6 A-6 Let’s assume the following additional information for Harvey Company. ▫ 20, 000 units were sold during the year at a price of $30 each. ▫ There is no beginning inventory. Now, let’s compute net operating income using both super-variable and variable costing. ©Mc. Graw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or fur distribution permitted without the prior written consent of Mc. Graw-Hill Education.
Super-Variable Costing Contribution Format Income Statement Direct material costs only. 6 A-7 All direct labor costs are expensed. ©Mc. Graw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or fur distribution permitted without the prior written consent of Mc. Graw-Hill Education.
Variable Costing Contribution Format Income Statement 6 A-8 Direct material and direct labor costs. Direct labor cost deferred in inventory is 5, 000 units × $3 = $15, 000. ©Mc. Graw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or fur distribution permitted without the prior written consent of Mc. Graw-Hill Education.
6 A-9 Comparing the Two Methods – Part 1 ©Mc. Graw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or fur distribution permitted without the prior written consent of Mc. Graw-Hill Education.
6 A-10 Comparing the Two Methods – Part 2 We can reconcile the difference between super-variable and variable income as follows: Direct labor Units produced $75, 000 = = $3 per unit 25, 000 units ©Mc. Graw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or fur distribution permitted without the prior written consent of Mc. Graw-Hill Education.
Extended Comparisons of Income Data Harvey Company – Year Two 6 A-11 ©Mc. Graw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or fur distribution permitted without the prior written consent of Mc. Graw-Hill Education.
6 A-12 Unit Cost Computations – Year Two Since the variable costs per unit, total fixed costs, and the number of units produced remained unchanged, the unit cost computations also remain unchanged. ©Mc. Graw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or fur distribution permitted without the prior written consent of Mc. Graw-Hill Education.
Super-variable Costing Contribution Format Income Statement – Year Two Direct material costs only. 6 A-13 All direct labor costs are expensed. ©Mc. Graw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or fur distribution permitted without the prior written consent of Mc. Graw-Hill Education.
Variable Costing Contribution Format Income Statement – Year Two 6 A-14 Direct material and direct labor costs. Direct labor cost released from inventory is 5, 000 units × $3 = $15, 000. ©Mc. Graw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or fur distribution permitted without the prior written consent of Mc. Graw-Hill Education.
Comparing the Two Methods – Year Two – Part 1 6 A-15 We can reconcile the difference between super-variable and variable income as follows: Direct labor Units produced $75, 000 = = $3 per unit 25, 000 units ©Mc. Graw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or fur distribution permitted without the prior written consent of Mc. Graw-Hill Education.
Comparing the Two Methods – Year Two – Part 2 6 A-16 ©Mc. Graw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or fur distribution permitted without the prior written consent of Mc. Graw-Hill Education.
6 A-17 End of Chapter 6 A ©Mc. Graw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or fur distribution permitted without the prior written consent of Mc. Graw-Hill Education.
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