During the first month of operations ended March 31, IceBox Fridgeration Company manufactured 46,000 mini refrigerators, of which 40,000 were sold. Operating data for the month are summarized as follows:

1	Sales		$8,800,000.00
2	Manufacturing costs:
3	Direct materials	$3,450,000.00
4	Direct labor	1,196,000.00
5	Variable manufacturing cost	782,000.00
6	Fixed manufacturing cost	598,000.00	6,026,000.00
7	Selling and administrative expenses:
8	Variable	$600,000.00
9	Fixed	320,000.00	920,000.00

	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 operating income reported in (1) and (2).

Labels and Amount Descriptions

Labels
March 31
Cost of goods sold
Fixed costs
For the Month Ended March 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
Operating income
Inventory, March 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.

Income Statement Instructions

IceBox Fridgeration Company

Absorption Costing Income Statement

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Variable Costing Income Statement

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

Income Statement Instructions

IceBox Fridgeration Company

Variable Costing Income Statement

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Final Question

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

The Operating income reported under costing exceeds the Operating income reported under costing, due to manufacturing costs that are deferred to a future month under costing.