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Absorption and Variable Costing Income Statements for Two Months and Analysis During the first month of operations ended May 31, 2016, T-shirt Express Company produced

Absorption and Variable Costing Income Statements for Two Months and Analysis

During the first month of operations ended May 31, 2016, T-shirt Express Company produced 27,200 designer T-shirts, of which 25,300 were sold. Operating data for the month are summarized as follows:

Sales $227,700
Manufacturing costs:
Direct materials $138,720
Direct labor 35,360
Variable manufacturing cost 16,320
Fixed manufacturing cost 13,600 204,000
Selling and administrative expenses:
Variable $12,650
Fixed 9,230 21,880

During June, T-shirt Express Company produced 23,400 designer T-shirts and sold 25,300 T-shirts. Operating data for June are summarized as follows:

Sales $227,700
Manufacturing costs:
Direct materials $119,340
Direct labor 30,420
Variable manufacturing cost 14,040
Fixed manufacturing cost 13,600 177,400
Selling and administrative expenses:
Variable $12,650
Fixed 9,230 21,880

1a. Prepare an income statement for May using the absorption costing concept. Enter all amounts as positive numbers.

T-shirt Express Company
Absorption Costing Income Statement
For the Month Ended May 31, 2016
Sales $
Cost of goods sold:
Cost of goods manufactured $
Less inventory, May 31
Cost of goods sold
Gross profit $
Selling and administrative expenses
Income from operations $

Feedback

1a. a. and b. Sales - (cost of goods manufactured - ending inventory*) = Gross profit; gross profit - selling and administrative expenses = income from operations. * (Manufactured Units - Sold units) x (total manufacturing costs/manufactured units) Sales - variable cost of goods sold* = Manufacturing margin; Manufacturing margin - variable selling and administrative expenses = Contribution margin; Contribution margin - (fixed manufacturing costs + fixed selling and administrative expenses) = income from operations. *Variable cost of goods sold = Variable cost of goods manufactured - [(Manufactured Units - Sold units) x (variable manufacturing costs/manufactured units)]

Learning Objective 1 and Learning Objective 2.

1b. Prepare an income statement for June using the absorption costing concept. Enter all amounts as positive numbers.

T-shirt Express Company
Absorption Costing Income Statement
For the Month Ended June 30, 2016
Sales $
Cost of goods sold:
Inventory, June 1 $
Cost of goods manufactured
Cost of goods sold
Gross profit $
Selling and administrative expenses
Income from operations $

Feedback

Learning Objective 1 and Learning Objective 2.

2a. Prepare an income statement for May using the variable costing concept. Enter all amounts as positive numbers.

T-shirt Express Company
Variable Costing Income Statement
For the Month Ended May 31, 2016
Sales $
Variable cost of goods sold:
Direct materials $
Less contribution margin
Manufacturing margin
Gross profit $
Direct labor
Fixed manufacturing costs $
Fixed costs:
Fixed contribution margin $
Fixed manufacturing margin
Loss from operations $

Feedback

2a. a. and b. Sales - (cost of goods manufactured - ending inventory*) = Gross profit; gross profit - selling and administrative expenses = income from operations. * (Manufactured Units - Sold units) x (total manufacturing costs/manufactured units) Sales - variable cost of goods sold* = Manufacturing margin; Manufacturing margin - variable selling and administrative expenses = Contribution margin; Contribution margin - (fixed manufacturing costs + fixed selling and administrative expenses) = income from operations. *Variable cost of goods sold = Variable cost of goods manufactured - [(Manufactured Units - Sold units) x (variable manufacturing costs/manufactured units)]

Learning Objective 1 and Learning Objective 2.

2b. Prepare an income statement for June using the variable costing concept. Enter all amounts as positive numbers.

T-shirt Express Company
Variable Costing Income Statement
For the Month Ended June 30, 2016
$
Variable cost of goods sold:
$
$
$
Fixed costs:
$
$

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