A Problem 2 Walsh Company manufactures 30,000 units during July. There were no units in inventory on July 1. Information on costs and expenses for July is as follows: D E F G H . L M N a R Manufacturing costs Variable Fixed Total manufacturing costs Selling and Administrative expenses Variable Fixed Total selling and administrative expenses Required: Total $ Number of units Unit $ 660,000 30,000 22 300,000 30,000 10 960,000 200,000 25,000 8 160,000 360,000 If the company sells 25,000 units at $75 (units manufactured exceeds units sold), prepare an income statement for July using: A. Absorption Costing B. Varibale Costing Solution: Siddique, Salina: COGS B+COGM-EI In this example, Bl=0 as there is no inventory on July 1. A. Absorption Costing Income Statement Sales Costs of Goods Sold Less Ending Inventory [$(22+10) x 5,000] $ $ 1,875,000 Costs of Goods Manufactured [$(22+10) x 30,000] 960,000 160.000 Total Costs of Goods Sold Gross Profit less Selling and Administrative expenses (200,000+ 160,000) Income from Operation 800.000 1,075,000 360.000 715,000 B. Variable Costing Income Statement Sales (25,000 x $75) $ $ 1,875,000 Variable Costs of Goods Sold Variable Manufacturing costs (30,000 x $22) 660,000 less Ending Inventory (5,000 x $22) 110.000 Total Variable COGS Manufacturing Margin Less Variable Selling and Administrative Expenses Contribution margin 550,000 1,325,000 200.000 1,125,000 Less Fixed costs Fixed manufacturing costs 300,000 Fixed Selling and Administrative expenses 160.000 Total Fixed costs 460.000 Income from Operation 665,000 Siddique, Salina: Ending inventory units 0+30,000 25,000 Bl Units Produced Units sold 5,000 units