Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Fresno Industries Inc. manufactures and sells high - quality camping tents. The company began operations on January 1 and operated at 1 0 0 %

Fresno Industries Inc. manufactures and sells high-quality camping tents. The company began operations on January 1 and operated at 100% of capacity (58,300 units) during the first month, creating an ending inventory of 5,300 units. During February, the company produced 53,000 units during the month but sold 58,300 units at $75 per unit. The February manufacturing costs and selling and administrative expenses were as follows:
Number of Units Unit Cost Total
Cost
Manufacturing costs in February 1 beginning inventory:
Variable 5,300 $30.00 $159,000
Fixed 5,30011.0058,300
Total $41.00 $217,300
Manufacturing costs in February:
Variable 53,000 $30.00 $1,590,000
Fixed 53,00012.10641,300
Total $42.10 $2,231,300
Selling and administrative expenses in February:
Variable 58,300 $14.30 $833,690
Fixed 58,3007.00408,100
Total $21.30 $1,241,790
Question Content Area
a. Prepare an income statement according to the absorption costing concept for the month ending February 28.
Fresno Industries Inc.
Absorption Costing Income Statement
For the Month Ended February 28
$- Select -
Cost of goods sold:
$- Select -
- Select -
- Select -
$- Select -
- Select -
$- Select -
Question Content Area
b. Prepare an income statement according to the variable costing concept for the month ending February 28.
Fresno Industries Inc.
Variable Costing Income Statement
For the Month Ended February 28
$- Select -
- Select -
$- Select -
- Select -
$- Select -
Fixed costs:
$- Select -
- Select -
- Select -
$- Select -
Question Content Area
c. What is the reason for the difference in the amount of operating income reported in (a) and (b)?
Under the
method, the fixed manufacturing cost included in the cost of goods sold is matched with the revenues. Under
, all of the fixed manufacturing cost is deducted in the period in which it is incurred, regardless of the amount of inventory change. Thus, when inventory decreases, the
income statement will have a lower operating income.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting An Introduction

Authors: Eddie McLaney, Dr Peter Atrill, Eddie J. Mclan

5th Edition

0273733206, 978-0273733201

More Books

Students also viewed these Accounting questions

Question

How do childhood experiences affect self-esteem?

Answered: 1 week ago

Question

OUTCOME 5 Discuss sexual harassment as an employment equity issue.

Answered: 1 week ago