When units produced are less than units sold, net income computed under variable costing will be:______.

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28-07-2022
Business

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When units produced are less than units sold, net income computed under variable costing will be:______.

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Tutorconsortium323 Tutorconsortium323 · Answer 1 · 2022-08-06T15:36:01+02:00

When units produced are less than units sold, net income computed under variable costing will be: Greater than net income computed under absorption

What is Variable Costing?

Variable costing is a cost accounting method for calculating production expenses where only variable costs are included in the product cost. The formula of variable costing only considers the direct cost and other variable manufacturing expenses incurred on each product unit.

Variable Costing Formula-

Variable costing is calculated as the sum of direct labor cost, direct raw material cost, and variable manufacturing overhead divided by the total number of units produced.

Variable costing formula = (Direct Labor Cost + Direct Raw Material Cost + Variable Manufacturing Overhead)/Number of Units Produced.

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