Question
Absorption and Variable Costing Income Statements During the first month of operations ended July 31, YoSan Inc. manufactured 10,300 flat panel televisions, of which 9,600
Absorption and Variable Costing Income Statements
During the first month of operations ended July 31, YoSan Inc. manufactured 10,300 flat panel televisions, of which 9,600 were sold. Operating data for the month are summarized as follows:
Sales$1,536,000
Manufacturing costs:
Direct materials$772,500
Direct labor226,600
Variable manufacturing cost195,700
Fixed manufacturing cost103,0001,297,800
Selling and administrative expenses:
Variable$124,800
Fixed57,400182,200
Required:
1. Prepare an income statement based on the absorption costing concept.
YoSan Inc.
Absorption Costing Income Statement
For the Month Ended July 31
$
Cost of goods sold:
$
$
$
2. Prepare an income statement based on the variable costing concept.
YoSan Inc.
Variable Costing Income Statement
For the Month Ended July 31
$
Variable cost of goods sold:
$
$
$
Fixed costs:
$
$
3. Explain the reason for the difference in the amount of operating income reported in (1) and (2).
The operating income reported under costing exceeds the operating income reported under costing, due to manufacturing costs that are deferred to a future month under costing.
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