Variable product cost=Direct material+ Direct labour+Variable manufacturing overhead
Absorption product cost=Direct material+Direct labour+Variable manufacturing overhead+Fixed manufacturing overhead
Profit under variable product costing
Sales revenue=sales price per unit*sales(volume)
less Variable expenses:
Variable cost of goods sold:
Beginning inventory(finished goods)
Add Current production costs
less Ending inventory(finished goods)
=Variable cost of goods sold
variable selling and administration expenses
(variable per unit*sales)
=Total variable expenses
Contribution margin
Less fixed expenses:
Fixed manufacturing overhead
Fixed selling and administrative expenses
Operating profit
