During the first month of operations ended July 31, YoSan Inc. manufactured 11,800 flat panel televisions, of which 10,900 were sold. Operating data for the month are summarized as follows:

Sales		$1,962,000
Manufacturing costs:
Direct materials	$1,003,000
Direct labor	295,000
Variable manufacturing cost	259,600
Fixed manufacturing cost	129,800	1,687,400
Selling and administrative expenses:
Variable	$152,600
Fixed	70,200	222,800

Required:

Question Content Area

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

Sales
Cost of goods sold:
Cost of goods manufacturedFixed manufacturing costsFixed selling and administrative expensesInventory, July 31Total cost of goods soldCost of goods manufactured
Contribution marginCost of goods manufacturedFixed manufacturing costsInventory, July 31Total cost of goods soldInventory, July 31	$...........
Fixed selling and administrative expensesGross profitInventory, July 31Manufacturing marginTotal cost of goods soldTotal cost of goods sold
Gross profitInventory, July 31Manufacturing marginSalesSelling and administrative expensesGross profit
Contribution marginInventory, July 31Selling and administrative expensesTotal cost of goods soldVariable selling and administrative expensesSelling and administrative expenses
Operating incomeLoss from operationsOperating income		$.............

Question Content Area

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

YoSan Inc. Variable Costing Income Statement For the Month Ended July 31

Contribution marginDirect laborFixed manufacturing costsInventory, July 31SalesSales		$...............
Variable cost of goods sold:
Cost of goods soldCost of goods manufacturedManufacturing marginVariable cost of goods manufacturedVariable selling and administrative expensesVariable cost of goods manufactured	$.........................
Contribution marginCost of goods soldFixed manufacturing costsInventory, July 31Inventory, July 31
Fixed manufacturing costsSalesTotal variable cost of goods soldVariable cost of goods manufacturedVariable selling and administrative expensesTotal variable cost of goods sold
Contribution marginFixed manufacturing costsGross profitInventory, July 31Manufacturing marginManufacturing margin
Fixed manufacturing costsFixed selling and administrative expensesInventory, July 31Manufacturing marginVariable selling and administrative expensesVariable selling and administrative expenses
Contribution marginCost of goods manufacturedInventory, July 31Manufacturing marginTotal variable cost of goods soldContribution margin
Fixed costs:
Fixed contribution marginFixed manufacturing costsFixed salesTotal variable cost of goods soldVariable cost of goods manufacturedFixed manufacturing costs
Fixed selling and administrative expensesFixed manufacturing marginTotal variable cost of goods soldVariable cost of goods manufacturedVariable selling and administrative expensesFixed selling and administrative expenses
Fixed selling and administrative expensesFixed manufacturing marginTotal fixed costsVariable cost of goods manufacturedVariable selling and administrative expensesTotal fixed costs
Operating incomeLoss from operationsOperating income

Question Content Area

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

The operating income reported under

absorptionvariableabsorption

costing exceeds the operating income reported under

absorptionvariablevariable

costing, due to

fixedvariablefixed

manufacturing costs that are deferred to a future month under

absorptionvariableabsorption

costing.

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