The Irish-based Independence Company had the following manufacturing data for the year 20X1 (in thousands of euros):
Question:
The Irish-based Independence Company had the following manufacturing data for the year 20X1 (in thousands of euros):
Selling expenses were €300,000 (including €80,000 that were variable) and general administrative expenses were €144,000 (including €25,000 that were variable). Sales were €2.2 million. Direct labour and supplies are regarded as variable costs.
1. Prepare two income statements, one using the contribution approach and one using the absorption approach.
2. Suppose that all variable costs fluctuate directly in proportion to sales and that fixed costs are unaffected over a very wide range of sales. What would operating income have been if sales had been €2.0 million instead of €2.2 million? Which income statement did you use to help obtain your answer? Why?
Transcribed Image Text:
Beginning and ending inventories
Direct material used
Direct labour
Supplies
Utilities - variable portion
Utilities - fixed portion
Indirect labour - variable portion
Indirect labour - fixed portion
Depreciation
Property taxes
Supervisory salaries
None
€400
330
20
40
15
90
50
200
20
60
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Here are the income statements for Independence Company for the year 20X1 Income Statement Contribut...View the full answer
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