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Marty's Entrees produces frozen meals, which it sells for $10 each. The company uses the FIFO inventory costing method, and it computes a new monthly
Marty's Entrees 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.) Read the requirements x January A Data Table February - X i Requirements Absorption Variable Absorption Variable costing costing costing costing January February Total product cost 1. Compute the product cost per meal produced under absorption costing and under variable costing. Do this first for January and then for February Sales. 1,400 meals 1,600 meals Requirement 2a. Prepare separate monthly income statements for January and for February, using absorption costing. 2. Prepare separate monthly income statements for January and for February, Production. 2,000 meals 1,400 meals using the following: Marty's Entrees a. Absorption costing Variable manufacturing expense per meal.. $4 $4 b. Variable costing. Income Statement (Absorption Costing) Sales commission expense per meal $2 $2 3. Is operating income higher under absorption costing or variable costing in Month Ended January? In February? Explain the pattern of differences in operating income Total fixed manufacturing overhead $700 $700 January 31 February 28 based on absorption costing versus variable costing. Total fixed marketing and administrative expenses . . $500 $500 Print Done Print Done nuary and February income statements using variable costing. Contribution margin 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 rees tement (Variable Costing) ded January 31 February 28 Less
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