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 Total product cost 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 Requirements: 1. Compute the product cost per meal produced underabsorption costing and under variable costing. Do this first for January, and then for Febuary. 2. Prepare seperate 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 under absortion costing and under variable costing. Do this first for January and the Febuary JAN FEB Absorbtion Costing Variable Costing Absorption Costing Variable Costing Total Product cost Requirement 2a. Prepare seperate monthly income statements for January and for Feb, using absorption costing Mario's Foods o Contribution Margin Income Statement (variable costing) Month Ended Jan 31 Feb 31 Less Requirement 2b. Prepare Marios Foods Jan and Feb income Statement using variable costing -- Requirement 3. Is operating income higher under absorption costing or variable costing in Jan? In Feb? Explain the pattern of differences in operating income based on absorption costing versus variable costing. In Jan, absorption costing operating income_---_lequals, exceeds or less than) variable costing income. This is because units produced lequal to greater than, less than) units were sold. Absorption costing some of _____(Jan or Feb) --------__(fixed manufacturing overhead, nonmaufactoring, variable maufactoring overhead) costs in the units of ending inventory. These cost will not be_____(capitalized, expensed, paid in for cash) until those are sold. Deferring these --- fixed manufactoring overhead, nonmanufactoring, variable manufactoring overhead)cost to the future -- (Increases, Decreases) January's absoprtion costing income. In Feb, absorption costing operating income --- (equals, exceeds, less than) variable costing operating income. This is because units produced were -- (equal to, greather than, less than)units sold for the month. As inventory_---__increases, declines) as was the case in this February, January's __(fixed manufactoring overhead, nonmanufactoring, variable manufactoring overhead) costs that absorption costing assigned to that inventory are expensed in __(Jan, Feb). This ------- (increases, decreases)Febuary's absorption costing income
