Operating statements

Operating statement under absorption costing

The purpose of calculating variances is to identify the different effects of each item of cost/income on
profit compared to the expected profit. These variances are summarized in a reconciliation statement or
operating statement.
Example operating statement absorption
Solution
Operating statement under marginal costing
The operating statement under marginal costing is the same as that under absorption costing except:
 a sales volume contribution variance is included instead of a sales volume profit variance
 the only fixed overhead variance is the expenditure variances
 The reconciliation is from budgeted to actual contribution then fixed overheads are deducted to
arrive at a profit.
Operating statement under marginal costing Example
Solution.