Chapter 21 Homework - ACC122041 AG CengageNOW2 Online Taching and come Statud hoort CO ebook Show Me How Income Statements under Absorption Costing and Variable Costing Fresno Industries Inc. manufactures and sells high-quality camping tents. The company began operations on January 1 and operated at 100% of capacity (73,700 ant during the first month, creating an ending inventory of 6,700 units. During February, the company produced 67,000 units during the month but sold 73.700 units at $100 per unit. The February manufacturing costs and selling and administrative expenses were as follows: Number of Unit Total Units Cost Cost Manufacturing costs in February 1 beginning inventory 1 Variable 6,700 $40.00 $2615,000 Fixed 6,700 15.00 100,500 Total 555.00 5368,500 Manufacturing costs in February Variable 67,000 $40.00 $2,680,000 Fixed 67,000 16.50 1.105.500 Total 556.50 $3,785,500 Selling and administrative expenses in February Variable 73,700 $19.50 $1437,150 Fixed 73,700 7.00 515.000 Total $26.50 $1,953,050 a. Prepare an income statement according to the absorption costing concept for the month ending February 28 Fresno Industries Inc Absorption Costing Income Statement For the Month Ended February 20 ods sold FIUSTISTS Absorption Costing Income Statement For the Month Ended February 28 Sales Cost of goods sold: Beginning inventory 36.00 Cost of goods manufactured 3.785.00 14,000 Total cost of goods sold Gross profit Selling and administrative expenses Operating income 1.0530507 Feedback Check My Work b. Under absorption costing, the cost of goods manufactured includes direct materials, direct labor, and factory overhead costs. Both red and are con costs are included as part of factory overhead. b. Prepare an income statement according to the variable costing concept for the month ending February 29, Fresno Industries Inc. Variable Costing Income Statement For the Month Ended February 28 Sales Variable cost of goods sold Manufacturing margin Variable selling and administrative expenses For the Month Ended February 20 Sales Variable cost of goods sold Manufacturing margin Variable selling and administrative expenses Contribution margin Fixed costs: Fixed manufacturing costs Fixed selling and administrative expenses Total fixed costs Operating income Feedback Check My Wo b. Under variable costing, the cost of goods manufactured includes only variable manufacturing costs. c. What is the reason for the difference in the amount of operating income reported in (a) and (b)? Under the absorption costing method, the foxed manufacturing cost included in the cost of goods told is matched with the revenues Under variable costing all of the fixed manufacturing cost is deducted in the period in which it is incurred, regardless of the amount of inventory change. The when Inventory decreases, the absorption costing Income statement will have a lower operating income Fodbad