Income Statements and Firm Performance: Variable and Absorption Costing

Jellison Company had the following operating data for its first two years of operations:

Variable costs per unit:
Direct materials		4.00
Direct labor		$2.90
Variable overhead		1.40
Fixed costs per year:
Overhead		180,000
Selling and administrative		70,400

Jellison produced 90,000 units in the first year and sold 80,000. In the second year, it produced 80,000 units and sold 90,000 units. The selling price per unit each year was $12. Jellison uses an actual costing system for product costing.

Required:

1. Prepare income statements for both years using absorption costing. If an amount is zero, enter "0".

Jellison Company Absorption-Costing Income Statement For Years 1 and 2

	Year 1	Year 2
Beginning inventoryCost of goods manufacturedGoods available for saleFixed selling and administrative expensesOperating incomeSalesSales	$Sales	$Sales
Less: Beginning inventoryLess: Cost of goods manufacturedLess: Goods available for saleLess: Cost of goods soldLess: Ending inventoryLess: Fixed selling and administrative expensesLess: SalesLess: Cost of goods sold	Less: Cost of goods sold	Less: Cost of goods sold
Gross profit	$fill in the blank 0ab2fd04504efa6_7	$fill in the blank 0ab2fd04504efa6_8
Less: Beginning inventoryLess: Cost of goods manufacturedLess: Cost of goods soldLess: Goods available for saleLess: Ending inventoryLess: Fixed selling and administrative expensesLess: SalesLess: Fixed selling and administrative expenses	Less: Fixed selling and administrative expenses	Less: Fixed selling and administrative expenses
Operating income	$fill in the blank 0ab2fd04504efa6_12	$fill in the blank 0ab2fd04504efa6_13
Cost of goods sold:
Beginning inventoryCost of goods soldEnding inventoryFixed selling and administrative expensesGoods available for saleSalesBeginning inventory	$Beginning inventory	$Beginning inventory
Cost of goods manufacturedCost of goods soldEnding inventoryFixed selling and administrative expensesGoods available for saleSalesCost of goods manufactured	Cost of goods manufactured	Cost of goods manufactured
Beginning inventoryCost of goods manufacturedCost of goods soldEnding inventoryFixed selling and administrative expensesGoods available for saleGross profitSalesGoods available for sale	$Goods available for sale	$Goods available for sale
Less: Beginning inventoryLess: Cost of goods manufacturedLess: Cost of goods soldLess: Ending inventoryLess: Fixed selling and administrative expensesLess: Goods available for saleLess: SalesLess: Ending inventory	Less: Ending inventory	Less: Ending inventory
Cost of goods sold	$fill in the blank 0ab2fd04504efa6_26	$fill in the blank 0ab2fd04504efa6_27

2. Prepare income statements for both years using variable costing. If an amount is zero, enter "0".

Jellison Company Variable-Costing Income Statement For Years 1 and 2

	Year 1	Year 2
Beginning inventoryFixed overheadFixed selling and administrative expensesGoods available for saleEnding inventoryVariable cost of goods soldSalesVariable cost of goods manufacturedSales	$Sales	$Sales
Less: Beginning inventoryLess: Fixed overheadLess: Fixed selling and administrative expensesLess: Goods available for saleLess: Ending inventoryLess: Variable cost of goods soldLess: SalesLess: Variable cost of goods manufacturedLess: Variable cost of goods sold	Less: Variable cost of goods sold	Less: Variable cost of goods sold
Contribution margin	$fill in the blank 832d1ef96fb902d_7	$fill in the blank 832d1ef96fb902d_8
Less:
Beginning inventoryFixed overheadGoods available for saleEnding inventoryVariable cost of goods soldSalesVariable cost of goods manufacturedFixed overhead	Fixed overhead	Fixed overhead
Beginning inventoryFixed selling and administrative expensesGoods available for saleEnding inventoryVariable cost of goods soldSalesVariable cost of goods manufacturedFixed selling and administrative expenses	Fixed selling and administrative expenses	Fixed selling and administrative expenses
Operating income	$fill in the blank 832d1ef96fb902d_15	$fill in the blank 832d1ef96fb902d_16
Variable cost of goods sold:
Beginning inventoryCost of goods soldEnding inventoryFixed overheadFixed selling and administrative expensesGoods available for saleSalesBeginning inventory	$Beginning inventory	$Beginning inventory
Fixed overheadFixed selling and administrative expensesGoods available for saleEnding inventoryVariable cost of goods soldSalesVariable cost of goods manufacturedVariable cost of goods manufactured	Variable cost of goods manufactured	Variable cost of goods manufactured
Beginning inventoryEnding inventoryFixed overheadFixed selling and administrative expensesGoods available for saleSalesVariable cost of goods manufacturedVariable cost of goods soldGoods available for sale	$Goods available for sale	$Goods available for sale
Less: Beginning inventoryLess: Ending inventoryLess: Fixed overheadLess: Fixed selling and administrative expensesLess: Goods available for saleLess: SalesLess: Variable cost of goods manufacturedLess: Variable cost of goods soldLess: Ending inventory	Less: Ending inventory	Less: Ending inventory
Cost of goods sold	$fill in the blank 832d1ef96fb902d_29	$fill in the blank 832d1ef96fb902d_30