Appendix Absorption costing income statement On June 30, 2016, the end of the first month of operations, Tudor Manufacturing Co.

prepared the following income statement, based on the variable costing concept:

Sales (420,000 units). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,450,000 Variable cost of goods sold:

Variable cost of goods manufactured (500,000 units × $14 per unit). . . . . . $7,000,000 Less ending inventory (80,000 units × $14 per unit). . . . . . . . . . . . . . . . . . . . . . 1,120,000 Variable cost of goods sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,880,000 Manufacturing margin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,570,000 Variable selling and administrative expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000 Contribution margin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,490,000 Fixed costs:

Fixed manufacturing costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 160,000 Fixed selling and administrative expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,000 235,000 Income from operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,255,000

a. Prepare an absorption costing income statement.

b. Reconcile the variable costing income from operations of $1,255,000 with the absorption costing income from operations determined in (a).

a. Gross profit,

$1,435,600 Problems: Series A