During the first month of operations ended July 31, YoSan Inc. manufactured 10,000 flat panel televisions, of which 9,200 were sold. Operating data for the month are summarized as follows:

Line Item Description	Amount	Amount
Sales		$1,196,000
Manufacturing costs:
Direct materials	$610,000
Direct labor	180,000
Variable manufacturing cost	160,000
Fixed manufacturing cost	80,000	1,030,000
Selling and administrative expenses:
Variable	$92,000
Fixed	42,300	134,300

Prepare an income statement based on the absorption costing concept.

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

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

Line Item Description	Amount	Amount
Contribution marginDirect laborFixed manufacturing costsInventory, July 31Sales		$- Select -
Variable cost of goods sold:
Cost of goods soldCost of goods manufacturedManufacturing marginVariable cost of goods manufacturedVariable selling and administrative expenses	$- Select -
Contribution marginCost of goods soldFixed manufacturing costsInventory, July 31	- Select -
Fixed manufacturing costsSalesTotal variable cost of goods soldVariable cost of goods manufacturedVariable selling and administrative expenses		- Select -
Contribution marginFixed manufacturing costsGross profitInventory, July 31Manufacturing margin		$- Select -
Fixed manufacturing costsFixed selling and administrative expensesInventory, July 31Manufacturing marginVariable selling and administrative expenses		- Select -
Contribution marginCost of goods manufacturedInventory, July 31Manufacturing marginTotal variable cost of goods sold		$- Select -
Fixed costs:
Fixed contribution marginFixed manufacturing costsFixed salesTotal variable cost of goods soldVariable cost of goods manufactured	$- Select -
Fixed selling and administrative expensesFixed manufacturing marginTotal variable cost of goods soldVariable cost of goods manufacturedVariable selling and administrative expenses	- Select -	blank
Fixed selling and administrative expensesFixed manufacturing marginTotal fixed costsVariable cost of goods manufacturedVariable selling and administrative expenses	blank	- Select -
Operating incomeLoss from operations		$- Select -

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 fill in the blank 1 of 4

absorptionvariable

costing exceeds the operating income reported under fill in the blank 2 of 4

absorptionvariable

costing, due to fill in the blank 3 of 4

fixedvariable

manufacturing costs that are deferred to a future month under fill in the blank 4 of 4

absorptionvariable

costing.