Ex 21-27

Variable Costing Income Statement

On July 31, the end of the first month of operations, Rhys Company prepared the following income statement, based on the absorption costing concept:

Sales (96,000 units)					$4,440,000
Cost of goods sold:
	Cost of goods manufactured		$3,120,000
	Less ending inventory (24,000 units)		624,000
	Cost of goods sold				2,496,000
Gross profit					$1,944,000
Selling and administrative expenses					288,000
Income from operations					$1,656,000

a. Prepare a variable costing income statement, assuming that the fixed manufacturing costs were $132,000 and the variable selling and administrative expenses were $115,200. In your computations, round unit costs to two decimal places and round final answers to the nearest dollar.

Rhys Company

Income Statement-Variable Costing

For the Month Ended July 31

Reconcile the absorption costing income from operations of $1,656,000 with the variable costing income from operations determined in (a).