Income statements under absorption costing and variable costing

Fresno Industries Inc. manufactures and sells high-quality camping tents. The company began operations on January 1 and operated at 100% of capacity (153,000 units) during the first month, creating an ending inventory of 24,000 units. During February, the company produced 129,000 units during the month but sold 153,000 units at $510 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	24,000		$255.00		$6,120,000
Fixed	24,000		21.00		504,000
Total			$276.00		$6,624,000
Manufacturing costs in February:
Variable	129,000		$255.00		$32,895,000
Fixed	129,000		24.20		3,121,800
Total			$279.20		$36,016,800
Selling and administrative expenses in February:
Variable	153,000		16.10		$2,463,300
Fixed	153,000		3.00		459,000
Total			19.10		$2,922,300

This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.

Open spreadsheet

a. Prepare an income statement according to the absorption costing concept for February. Enter all amounts as positive numbers.

Fresno Industries Inc.
Absorption Costing Income Statement
For the Month Ended February 28
Sales				$___________
Cost of goods sold:
Beginning inventory		$____________
Cost of goods manufactured		____________
Total cost of goods sold				______________
Gross profit				$_____________
Selling and administrative expenses				_______________
Operating income				$______________

b. Prepare an income statement according to the variable costing concept for February. Enter all amounts as positive numbers.

Fresno Industries Inc.
Variable Costing Income Statement
For the Month Ended February 28
Sales				$______________
Variable cost of goods sold				_______________
Manufacturing margin				$______________
Variable selling and administrative expenses				______________
Contribution margin				$______________
Fixed costs:
Fixed manufacturing costs		$___________
Fixed selling and administrative expenses		______________
Total fixed costs				______________
Operating income				$____________