Question Set Time Elapsed 28 39 MINUTES SECONDS Unsplit Split Horiz Spilt Vertic

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Question Set Time Elapsed 28 39 MINUTES SECONDS Unsplit Split Horiz Spilt Vertical Submit Teste Written Communication Help Allpro Clubs is a start-up com three quarters, despite increased production and the acquisition of financing, In reviewing the operating performance of Allpro, you notice that the company's income statement has been prepared using variable pany that manufactures golf clubs. The owner of the company is upset because Allpro has reported losses for the last i new customers. The owner is worried about his ability to obtain additional costing. You know that although the company is not required t costing and how a change in methodology could impact the com enior accountant, draft a memo to the owner explaining the differences between variable and absorption REMINDER: Your response will be graded for both technical content and writing skills. Technical content will be evaluated that is helpful to the intended reader and clearly relevant the appropriate expression of ideas in professional correspondence. Use a standard business memo or letter format with a beginning, middle, and end. Do not convey information in the form of a table, bullet point list, or other abbreviated presentation. for information clear Memorandum

Explanation / Answer

To, Allpro Clubs Owner Sub : Absorption Vs. Variable Costing Dear Sir As we are aware that we are facing difficulty in our ability to obtain additional financing despite increased production and acquisition of new customers. I have a suggestion to put forward in this regard. As I have notice that we are preparing our Income statement using variable costing despite the fact that we are not supposed to do the same under GAAP. I have to mention that Under the absorption costing method, The fixed manufacturing cost included in the cost of goods sold is matched with the revenue. Under variable costing method, all of the fixed manufacturing cost is deducted in the period in which it is incurred, regardless of the amount of inventory change. Thus, when Inventory increases with increased production, the absorption costing income statement will have a higher income from operations. Thus, I request you to change the methodology of reporting income statement from variable costing to absorption costing and thus impact the profitability of the company. Thanking you Yours truly (Senior Accountant)

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