In May, Limonade produced 10,000 cases of powdered drink mix and sold 13,000 cases, of which 3,000 were produced in April. The total April production was 15,000. The sales price was $24, variable costs were $7 per case ($5 manufacturing and $2 selling andadministrative), and total fixed costs were $75,000 ($60,000 manufacturing and $15,000 selling andadministrative). Limonade's May income statement using variable costingfollows:

Reference

Net Sales Revenue $312,000

Variable Costs:

Variable Manufacturing Overhead ($65000)

Variable Selling and Administrative Costs ($26000)

Contribution Margin 221,000

Fixed Costs:

Fixed Manufacturing Overhead (60,000)

Fixed Selling and Administrative Costs (15,000)

Operating Income 146,000

Requirements

1. Prepare the May income statement using absorption costing.

2. Is operating income using absorption costing higher or lower than variable costingincome? Explain why.

3. Determine the balance in Finished Goods Inventory as of May 31.