Absorption costing income statement OBJ. 1 On July 31, the end of the first month of operations, Del Ray Equipment Company prepared the following income statement, based on the variable costing concept:

Del Ray Equipment Company Variable Costing Income Statement For the Month Ended July 31, 2016 Sales (50,000 units) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,250,000 Variable cost of goods sold:

Variable cost of goods manufactured . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,100,000 Less inventory, July 31 (12,000 units) . . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000 Variable cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500,000 Manufacturing margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,750,000 Variable selling and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . 1,575,000 Contribution margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,175,000 Fixed costs:

Fixed manufacturing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 620,000 Fixed selling and administrative expenses . . . . . . . . . . . . . . . . . . . . . . 487,500 1,107,500 Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,067,500 Prepare an income statement under absorption costing.