Chapter 21: Q-21-16 (page 1167)
How can variable costing be used in service companies?
Answer
Variable costing can be used for profitability analysis and contribution margin analysis.
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When units produced exceed units sold, how does operating income differ between variable costing and absorption costing? Why?
Using variable costing, service company Sherman Company provides carpet cleaning services to commercial and residential customers. Using the data below, determine the contribution margin ratio for each business segment, rounded to two decimal places:
Calculating contribution margin and operating income, variable costing
Calculate the contribution margin and operating income for June using variable costing.
Use the following information for Short Exercises S21-4 and S21-5.
Dracut Company reports the following information for June:
Net Sales Revenue $ 755,000 Variable Cost of Goods Sold 240,000 Fixed Cost of Goods Sold 198,000 Variable Selling and Administrative Costs 168,000 Fixed Selling and Administrative Costs 79,000
Calculating gross profit and operating income, absorption costing Calculate the gross profit and operating income for June using absorption costing
Use the following information for Short Exercises S21-4 and S21-5.
Dracut Company reports the following information for June:
Net Sales Revenue $ 755,000 Variable Cost of Goods Sold 240,000 Fixed Cost of Goods Sold 198,000 Variable Selling and Administrative Costs 168,000 Fixed Selling and Administrative Costs 79,000
Explain how the sales mix can affect the profitability of a company.
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