QQuestionAccounting
QuestionAccounting
"How do I find the variable cost of goods sold on a variable costing income statement?"
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Answer
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Step 1: Understand the components of a variable costing income statement
A variable costing income statement separates manufacturing costs into two categories: variable costs and fixed costs. Variable costs are those that change with the level of production, while fixed costs remain constant in the short term. The variable cost of goods sold (VCGS) is the direct costs that change as the number of goods produced changes.
Step 2: Identify the variable costs in the manufacturing process
Variable costs typically include: - Direct materials: costs of raw materials used in producing the goods. - Direct labor: costs of wages paid to workers directly involved in producing the goods. - Variable overhead: costs that change with the level of production, such as utility costs directly related to manufacturing operations.
Final Answer
The variable cost of goods sold (VCGS) is calculated by subtracting any variable costs not directly related to goods sold from the total variable costs, which include direct materials, direct labor, and variable overhead. Proper accounting and tracking of these costs throughout the production process are essential to accurately calculate the VCGS on a variable costing income statement.
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