Absorption CostingIncome Statement

On June 30, the end of the first month of operations, Tudor Manufacturing Co. prepared the following income statement, based on thevariable costingconcept:

Sales (420,000 units)$7,450,000Variable cost of goods sold:Variable cost of goods manufactured (500,000 units x $14 per unit)$7,000,000Less ending inventory (80,000 units x $14 per unit)1,120,000Variable cost of goods sold5,880,000Manufacturing margin$1,570,000Variable selling and administrative expenses80,000Contribution margin$1,490,000Fixed costs:Fixed manufacturing costs$160,000Fixed selling and administrative expenses75,000235,000Income from operations$1,255,000

a. absorption costing income statement. In your computations, round unit costs to two decimal places and round final answers to the nearest dollar.

Tudor Manufacturing Co.Income Statement-Absorption CostingFor the Month Ended June 30Sales

$Cost of goods sold:Cost of goods manufactured

$Less ending inventory

Cost of goods sold

Gross profit

$Selling and administrative expenses

Income from operations$

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a. Review the absorption costing income statement.

b.Reconcile the variable costing income from operations of $1,255,000 with the absorption costing income from operations determined in (a).

Reconciliation of Variable and Absorption Costing IncomeVariable costing income from operations$Absorption costing income from operationsDifference$

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b. How is the factory overhead reported in each of the two income statements?

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