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 (150,000 units) during the first month, creating an ending inventory of 20,000 units. During February, the company produced 130,000 units during the month but sold 150,000 units at $500 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	20,000		$275.00		$5,500,000
Fixed	20,000		26.00		520,000
Total			$301.00		$6,020,000
Manufacturing costs in February:
Variable	130,000		$275.00		$35,750,000
Fixed	130,000		30.00		3,900,000
Total			$305.00		$39,650,000
Selling and administrative expenses in February:
Variable	150,000		$20.00		$3,000,000
Fixed	150,000		1.30		195,000
Total			$21.30		$3,195,000

Question Content Area

a. Prepare an income statement according to the absorption costing concept for the month ending February 28.

b. Prepare an income statement according to the variable costing concept for the month ending February 28.