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Why do the following exercises teaching needs to less other variable cost ? use AC & MC
MC
Sales ( 10,000 units ) 15,000
Less : COS
opn inventory 0.00
add : cost of prod 10,000
less : closing inv 5000 5000
————–
gross contribution 10000less : other variable cost (based on sales unit) 1000
10,000 units —————-
total contribution 9000less : prod. OH 6000
selling & admin 1000
—————-
net profit 2000because I have one practices review question ,asked to find out the profit for AC & MC is not necessary to minus other variable cost based on sales units. please advise.
Other variable costs do reduce the profit whether you are using absorption or marginal costing.
They do not affect inventory values, because inventory only includes production costs.
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