Absorption and The concept that considers the cost of products manufactured to be composed only of those manufacturing costs that increase or decrease as the volume of production rises or falls (direct materials, direct labor, and variable factory overhead).Variable Costing Income Statements

During the first month of operations ended July 31, 2016, YoSan Inc. manufactured 2,400 flat panel televisions, of which 2,000 were sold. Operating data for the month are summarized as follows:

Sales		$2,150,000
Manufacturing costs:
Direct materials	$960,000
Direct labor	420,000
Variable manufacturing cost	156,000
Fixed manufacturing cost	288,000	1,824,000
Selling and administrative expenses:
Variable	$204,000
Fixed	96,000	300,000

Required:

1. Prepare an income statement based on the absorption costing concept.

YoSan Inc.

Absorption Costing Income Statement

For the Month Ended July 31, 2016

Sales 2,150,000 Cost of goods sold: Cost of goods manufactured 1,824,000 Less inventory, July 31 304,000 Cost of goods sold 1,520,000 Gross Profit 630,000 Selling and administrative expenses 300,000 Income from operations 330,000

2. Prepare an income statement based on the variable costing concept.

YoSan Inc.

Variable Costing Income Statement

For the Month Ended July 31, 2016

Sales $ Variable Cost of goods sold: Variable cost of goods manufactured $ Less inventory July, 31 Variable Cost of goods sold Manufacturing margin $ Variable seeling and administrative expenses Contribution margin $ Fixed Costs: Fixed manufacturing costs $ Fixed selling and administrative expenses Income from operation $