ECONOMICS

Detailed explanation-1: -7. Canyon reported $106, 000 of net income for the year by using variable costing. The company had no beginning inventory, planned and actual production of 50, 000 units, and sales of 47, 000 units. Standard variable manufacturing costs were $15 per unit, and total budgeted fixed manufacturing overhead was $150, 000.

Detailed explanation-2: -Under variable costing, fixed manufacturing overhead cost is not treated as a product cost. The costs assigned to units in inventory are typically lower under variable costing than under absorption costing. Direct materials is considered to be a product cost under variable costing but not absorption costing.

Detailed explanation-3: -Variable Cost Formula. To calculate variable costs, multiply what it costs to make one unit of your product by the total number of products you’ve created. This formula looks like this: Total Variable Costs = Cost Per Unit x Total Number of Units.

Detailed explanation-4: -Under absorption costing, product costs include all manufacturing costs: Direct materials. Direct labor. Variable manufacturing overhead.