Mark's Meals produces frozen meals, which it sells for $9 each. The company uses the FIFO inventory costing method, and it computes a new monthly fixed manufacturing overhead rate based on the actual number of meals produced that month. All costs and production levels are exactly planned. The following data are from the company's first two months in business: (Click the icon to view the data.) Requirements 1. Compute the product cost per meal produced under absorption costing and under variable costing. Do this first for January and then for Februa 2. Prepare separate monthly income statements for January and for February, using the following: a. Absorption costing b. Variable costing. 3. Is operating income higher under absorption costing or variable costing in January? In February? Explain the pattern of differences in operating income based on absorption costing versus variable costing. Requirement 1.0 then for February. Data Table X January and Sales........... January 1,500 meals 2,000 meals 4 Total product cost February 1,900 meals 1,600 meals 4 1 800 Requirement 2a. EA Production ........ Variable manufacturing expense per meal............ Sales commission expense per meal................ Total fixed manufacturing overhead ...............$ Total fixed marketing and administrative expenses . . . . . $ $ EA $ 800 50 500 Print Sales revenue Done Less: Cost of goods sold Gross profit Less: Fixed expenses Operating income Requirement 2b. Prepare Mark's Meals' January and February income statements using variable costing. Mark's Meals Mark's Meals produces frozen meals, which it sells for $9 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 D 4 February Absorption Variable costing costing D Total product cost Requirement 2a. Prepare separate monthly income statements for January and for February, using absorption costing. Mark's Meals Income Statement (Absorption Costing) Month Ended January 31 February 28 Sales revenue Less: Cost of goods sold Gross profit Less: Fixed expenses Operating income Requirement 2b. Prepare Mark's Meals' January and February income statements using variable costing. Mark's Meals Requirement 2b. Prepare Mark's Meals' January and February income statements using variable costing. Mark's Meals Contribution Margin Income Statement (Variable Costing) Month Ended January 31 February 28 Sales revenue Less: Cost of goods sold 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 V units sold. 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. variable costing income. This is because units produced were In January, absorption costing operating income sold. V units V costs in the units of ending inventory. These costs will not be Absorption costing defers some of V until those units are sold. Deferring these Deferring these L costing income. costs to the future January's absorption In February, absorption costing operating income variable costing operating income. This is because units produced were units sold for the month. V costs that absorption costing assigned to As inventory V, as was the case in this February, January's that inventory are expensed in . This February's absorption costing income