Search the Web using the term “variable costing”. You will find numerous sites where accounting professors discuss variable and full costing (also called absorption costing).Find a site that discusses the pros and cons of variable costing and compare the discussion to the treatment in the chapter.
Xenco, Inc. produces stereo speakers. The selling price per pair of speakers is $1,800.
Costs involved in production are:
Direct material............ $ 150
Direct labor.............. 200
Variable manufacturing overhead....... 100
Total variable manufacturing costs per unit. $ 450
Fixed manufacturing overhead per year.... $540,000
In addition, the company has fixed selling and administrative costs:
Fixed selling costs per year...... $210,000
Fixed administrative costs per year... $110,000