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During the first month of operations ended August 31, Kodiak Fridgeration Company manufactured 80,000 mini refrigerators, of which 72,000 were sold. Operating data for the

During the first month of operations ended August 31, Kodiak Fridgeration Company manufactured 80,000 mini refrigerators, of which 72,000 were sold. Operating data for the month are summarized as follows:

1

Sales

$10,800,000.00

2

Manufacturing costs:

3

Direct materials

$6,400,000.00

4

Direct labor

1,600,000.00

5

Variable manufacturing cost

1,280,000.00

6

Fixed manufacturing cost

320,000.00

9,600,000.00

7

Selling and administrative expenses:

8

Variable

$1,080,000.00

9

Fixed

180,000.00

1,260,000.00

Required:

1.

Prepare an income statement based on the absorption costing concept.*

2.

Prepare an income statement based on the variable costing concept.*

3.

Explain the reason for the difference in the amount of income from operations reported in (1) and (2).

* Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if required. Enter Inventory, August 31 as a negative number using a minus sign. If a net loss is incurred, enter that amount as a negative number using a minus sign.

Labels and Amount Descriptions

Labels

August 31

Cost of goods sold

Fixed costs

For the Month Ended August 31

Variable cost of goods sold

Amount Descriptions

Contribution margin

Contribution margin ratio

Cost of goods manufactured

Fixed manufacturing costs

Fixed selling and administrative expenses

Gross profit

Income from operations

Inventory, August 31

Loss from operations

Manufacturing margin

Planned contribution margin

Sales

Sales mix

Selling and administrative expenses

Total cost of goods sold

Total fixed costs

Total variable cost of goods sold

Variable cost of goods manufactured

Variable selling and administrative expenses

Absorption Costing Income Statement

1. Prepare an income statement based on the absorption costing concept. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if required. Enter Inventory, August 31 as a negative number using a minus sign. If a net loss is incurred, enter that amount as a negative number using a minus sign.

Kodiak Fridgeration Company

Absorption Costing Income Statement

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2

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Variable Costing Income Statement

2. Prepare an income statement based on the variable costing concept. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if required. Enter Inventory, August 31 as a negative number using a minus sign. If a net loss is incurred, enter that amount as a negative number using a minus sign.

Kodiak Fridgeration Company

Variable Costing Income Statement

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