Absorption Costing and Variable Costing

What costs are included in unit cost under absorption costing?

direct materials, direct labor, variable overhead, and fixed overhead

What costs are included in unit cost under variable costing?

direct materials, direct labor, and variable costing

What is the format of the absorption costing income statement?

Sales, COGS, Gross Profit, Selling and Administrative expenses, Income

What is the format of the variable costing income statement?

Sales, Variable expenses (COGS and expenses), Contribution margin, Fixed expenses (overhead and expenses), income 

What is the difference between these two methods, presentation-wise?

Absorption costing uses a gross margin income statement with fixed and variable included in COGS. variable costing presents a contribution margin income statement that separates fixed manufacturing costs as a period expense.

Income from operations equals under two methods

production = sales

Income from operation is higher under the two methods 

Absorption and production is greater than sales

Income from operation is lower under the two methods

Variable and sales is greater than production

How can management manipulate absorption costing net income?

Over producing more units that are sold to shift fixed manufacturing costs into the ending inventory