Question
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
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 (155,000 units) during the first month, creating an ending inventory of 16,000 units. During February, the company produced 139,000 units during the month but sold 155,000 units at $580 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 | 16,000 | $290.00 | $4,640,000 |
Fixed | 16,000 | 35.00 | 560,000 |
Total | $325.00 | $5,200,000 | |
Manufacturing costs in February: | |||
Variable | 139,000 | $290.00 | $40,310,000 |
Fixed | 139,000 | 40.40 | 5,615,600 |
Total | $330.40 | $45,925,600 | |
Selling and administrative expenses in February: | |||
Variable | 155,000 | $26.90 | $4,169,500 |
Fixed | 155,000 | 5.00 | 775,000 |
Total | $31.90 | $4,944,500 |
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 the month ending February 28.
Line Item Description | Amount | Amount |
---|---|---|
Beginning inventoryCost of goods manufacturedGross profitSalesSelling and administrative expenses | $fill in the blank 3 | |
Cost of goods sold: | ||
Beginning inventoryContribution marginCost of goods soldGross profitSelling and administrative expenses | $fill in the blank 5 | |
Cost of goods manufacturedCost of goods soldGross profitSalesSelling and administrative expenses | fill in the blank 7 | |
Beginning inventoryCost of goods manufacturedGross profitSelling and administrative expensesTotal cost of goods sold | fill in the blank 9 | |
Cost of goods manufacturedCost of goods soldGross profitSalesSelling and administrative expenses | $fill in the blank 11 | |
Beginning inventoryCost of goods manufacturedGross profitSalesSelling and administrative expenses | fill in the blank 13 | |
Operating incomeLoss from operations | $fill in the blank 15 |
b. Prepare an income statement according to the variable costing concept for the month ending February 28.
Line Item Description | Amount | Amount |
---|---|---|
Contribution marginFixed selling and administrative expensesManufacturing marginSalesVariable selling and administrative expenses | $fill in the blank 17 | |
Contribution marginManufacturing marginSalesVariable cost of goods soldVariable selling and administrative expenses | fill in the blank 19 | |
Fixed manufacturing costsManufacturing marginSalesVariable cost of goods soldVariable selling and administrative expenses | $fill in the blank 21 | |
Contribution marginManufacturing marginSalesVariable cost of goods soldVariable selling and administrative expenses | fill in the blank 23 | |
Contribution marginFixed manufacturing costsFixed selling and administrative expensesManufacturing marginSales | $fill in the blank 25 | |
Fixed costs: | ||
Contribution marginFixed manufacturing costsSalesVariable cost of goods soldVariable selling and administrative expenses | $fill in the blank 27 | |
Fixed selling and administrative expensesManufacturing marginSalesVariable cost of goods soldVariable selling and administrative expenses | fill in the blank 29 | |
Contribution marginManufacturing marginOperating incomeSalesTotal fixed costs | fill in the blank 31 | |
Operating incomeLoss from operations | $fill in the blank 33 |
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