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Mark's Meals produces frozen meals, which it sells for $10 each. The company uses the FIFO inventory costing method, and it computes a new monthly
Mark's Meals produces frozen meals, which it sells for $10 each. The company uses the FIFO inventory costing method, and it computes a new monthly fixed manufacturing overhead rate based on the actual number of meals produced that month. All costs and production levels are exactly as planned. The following data are from the company's first two months in business: (Click the icon to view the data.) Requirements 1. Compute the product cost per meal produced under absorption costing and under variable costing. Do this first for January and then for February 2. Prepare separate monthly income statements for January and for February, using the following: a. Absorption costing b. Variable costing. 3. Is operating income higher under absorption costing or variable costing in January? In February? Explain the pattern of differences in operating income based on absorption costing versus variable costing Requirement 1. Compute the product cost per meal produced under absorption costing and under variable costing. Do this first for January and then for February. January Absorption Variable costing costing $ 3.35 $ February Absorption Variable costing costing $ 3.50 $ 3.00 Total product cost 3.00 Requirement 2a. Prepare separate monthly income statements for January and for February, using absorption costing. Sales. January 1,500 meals 2,000 meals 3 February 1,800 meals 1,400 meals 3 Production Variable manufacturing expense per meal. Sales commission expense per meal. Total fixed manufacturing overhead Total fixed marketing and administrative expenses. $ $ 1 1 $ 700 700 $ 300 300 Mark's Meals produces frozen meals, which it sells for $10 each. The company uses the FIFO inventory costing method, and it computes a new monthly fixed manufacturing overhead rate based on the actual number of meals produced that month. All costs and production levels are exactly as planned. The following data are from the company's first two months in business: 5 Click the icon to view the data.) Requirements 1. Compute the product cost per meal produced under absorption costing and under variable costing. Do this first for January and then for February. 2. Prepare separate monthly income statements for January and for February, using the following: a. Absorption costing b. Variable costing 3. Is operating income higher under absorption costing or variable costing in January? In February? Explain the pattern of differences in operating income based on absorption costing versus variable costing Absorption Variable Absorption Variable costing costing costing costing Total product cost $ 3.35 $ 3.00 $ 3.50 $ 3.00 Requirement 2a. Prepare separate monthly income statements for January and for February, using absorption costing. Mark's Meals Income Statement (Absorption Costing) Month Ended 3 Question Help o sells for $10 each. The company uses the FIFO inventory costing method, and it computes a new monthly fixed manufacturing overhead rate based nonth. All costs and production levels are exactly as planned. The following data are from the company's first two months in business: Contribution margin 1 Cost of goods sold Fixed expenses Fixed manufacturing overhead Fixed operating expenses Gross profit Operating expenses Operating income Sales revenue Variable cost of goods sold - Variable expenses Variable operating expenses ed under absorption costing and under variable costing. Do this first for January and then for February nts for January and for February, using the following: n costing or variable costing in January? In February? Explain the pattern of differences in operating income based on absorption costing versus January 31 Less: Less: Choose from any list or enter any number in the input fields and then click Check Answer. Requirement 2b. Prepare Marty's Entrees' January and February income statements using variable costing. Marty's Entrees Contribution Margin Income Statement (Variable Costing) Month Ended January 31 February 28 Sales revenue Less: Variable expenses Variable cost of goods sold Variable operating expenses II Less: Requirement 3. Is operating income higher under absorption costing or variable costing in January? In February? Explain the pattern of differences in operating income based on absorption costing versus variable costing, In January, absorption costing operating income variable costing income. This is because units produced were units sold. Absorption costing defers some of costs in the units of ending inventory. These costs will not be until those units are sold. Deferring these costs to the future January's absorption costing income In February, absorption costing operating income V variable costing operating income. This is because units produced were units sold for the month. as was the case in this February, January's costs that absorption costing assigned to that inventory are expensed in This February's absorption costing As inventory income
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