COST ACCOUNTING
VARIABLE COSTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Gross margin of 270, 000
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Contribution margin of 330, 000
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gross margin of 330, 000
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Gross margin of 145, 000
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Detailed explanation-1: -The contribution margin is sales minus variable costs (80, 000-20, 000) = 60, 000. Then, 60, 000/80, 000=75%.
Detailed explanation-2: -The contribution margin is the amount remaining from sales revenues after variable expenses have been deducted. The high-low method uses cost and activity data from just two periods to establish the formula for a mixed cost.
Detailed explanation-3: -Under the variable costing method, only the variable cost to produce is considered as a product cost. All other costs incurred will be treated as period costs.
Detailed explanation-4: -Absorption costing income exceeds variable costing income when units produced are *greater than units sold. If the number of units produced in a period is smaller than the number of units sold in period, absorption costing income will be higher than variable costing income.