Math Problem Statement
Berikan argumentasi metode mana yang baik digunakan untuk perusahaan tersebut
Solution
The problem you've provided revolves around a company named "Aman" which produces product X. Here are some important details from the text:
- The product is sold at Rp. 14.40 per unit.
- In 2013, the company produced 80,000 units but only sold 72,000 units.
- The company incurs both variable and fixed costs, which are broken down as:
- Variable costs:
- Raw materials: 280,000
- Direct labor: 200,000
- Factory overhead: 80,000
- Administration and selling: 69,120
- Fixed costs:
- Factory overhead: 180,000
- Administration and selling: 120,000
- Variable costs:
In choosing a method for the company, we generally evaluate between Absorption Costing and Variable Costing (also known as Marginal Costing). Here’s an overview of both:
1. Absorption Costing:
- Includes both variable and fixed production costs in the cost of the product.
- Inventory is valued with fixed and variable costs.
- When units are unsold, some fixed costs remain in inventory.
- Profits may appear higher if not all units are sold since fixed costs are deferred into inventory.
2. Variable Costing (Marginal Costing):
- Only variable costs are included in the product cost.
- Fixed costs are treated as period costs, directly deducted from the total revenue in the period they are incurred.
- Profits reflect only the actual units sold, making it a clearer picture of operational performance.
Analysis for the company:
- Since the company produced more than it sold (80,000 units produced vs. 72,000 units sold), Absorption Costing may overstate profits because a portion of fixed costs would be allocated to the unsold inventory.
- Variable Costing would provide a more transparent view of profitability based solely on the products sold, without the potential inflation of profits due to unsold inventory.
Argument:
- Variable Costing could be more suitable for the company, especially if management is focused on cost control and understanding the direct contribution margin from sales. It provides a more accurate picture of operating profit, without deferring costs to future periods.
- However, if the company is preparing financial statements for external purposes (like investors or tax reporting), Absorption Costing might be required because it is generally accepted under accounting standards (GAAP/IFRS).
Do you want a more detailed breakdown of calculations to illustrate both methods for this scenario?
Here are 5 relative questions to further explore the topic:
- How would the profit differ under Variable Costing and Absorption Costing for this company?
- What impact does selling fewer units than produced have on financial statements under Absorption Costing?
- Why is it important to differentiate between fixed and variable costs in decision-making?
- How does inventory valuation change under Absorption and Variable Costing methods?
- What are the managerial implications of choosing one costing method over the other?
Tip: Use Variable Costing when analyzing short-term decisions, as it highlights how much of each sale contributes to fixed costs and profits.
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Math Problem Analysis
Mathematical Concepts
Costing Methods
Absorption Costing
Variable Costing
Financial Analysis
Formulas
Total Cost = Variable Costs + Fixed Costs
Profit = Total Revenue - Total Cost
Absorption Costing: Inventory Cost = Variable Production Costs + Allocated Fixed Costs
Variable Costing: Inventory Cost = Variable Production Costs Only
Theorems
Absorption Costing Principle
Variable Costing Principle
Suitable Grade Level
Undergraduate Accounting or Finance
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