Appliance Apps has the following costs associated with its production and sale of devices that allow appliances to receive commands from cell phones.

Beginning Inventory	0
Units Produced	26,000
Units Sold	20,800
Selling Price per Unit	$144
Variable Sales and Administration Expenses	$4
Fixed Sales and Administration Expenses	$1,008,800
Direct Material Cost per Unit	$25
Direct Labor Cost per Unit	$10
Variable Manufacturing Overhead Cost per Unit	$3
Fixed Manufacturing Overhead Cost per Month	$1,016,600

Prepare an income statement under the absorption method. If an amount box does not require an entry, leave it blank.

Appliance Apps
Income Statement: Absorption
Sales		$
Cost of Goods Sold:
Beginning Inventory	$
Cost of Goods Manufactured
Cost of Goods Available for Sale	$
Ending Inventory
Total Cost of Goods Sold
Gross Profit		$
Sales and Administrative Expenses:
Variable	$
Fixed
Total Fixed Sales and Administrative Expenses
Net Operating Income		$

Feedback

Absorption costing includes all costs necessary for production. Conversely, variable costing only uses the variable costs that relate directly to the production process. Keep this in mind when calculating net income under each assumption. Depending on the cost method chosen, there will be differences due to the way fixed costs are treated under each method (absorption and variable).

Prepare an income statement under the variable costing method. If an amount box does not require an entry, leave it blank.

Appliance Apps
Income Statement: Variable
		$
Cost of Goods Sold:
	$
	$
Total Cost of Goods Sold
		$
Sales and Administrative Expenses:
Variable
		$
	$
		$

Feedback

Absorption costing includes all costs necessary for production. Conversely, variable costing only uses the variable costs that relate directly to the production process. Keep this in mind when calculating net income under each assumption. Depending on the cost method chosen, there will be differences due to the way fixed costs are treated under each method (absorption and variable).

Prepare a reconciliation between the two statements.

Reconciliation
	$
	$

Feedback

Absorption costing includes all costs necessary for production. Conversely, variable costing only uses the variable costs that relate directly to the production process. Keep this in mind when calculating net income under each assumption. Depending on the cost method chosen, there will be differences due to the way fixed costs are treated under each method (absorption and variable).

Feedback