Question
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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