On July 31, 2016, the end of the first month of operations, Rhys Company prepared the following income statement, based on the absorption costing concept:

Rhys Company

Income Statement - Absorption Costing

For the Month Ended July 31, 2016

1	Sales (96,000 units)		$4,440,000.00
2	Cost of goods sold:
3	Cost of goods manufactured	$3,120,000.00
4	Less ending inventory (24,000 units)	624,000.00
5	Cost of goods sold		2,496,000.00
6	Gross profit		$1,944,000.00
7	Selling and administrative expenses		288,000.00
8	Income from operations		$1,656,000.00

Required:

A.

Prepare a variable costing income statement, assuming that the fixed manufacturing costs were $132,000 and the variable selling and administrative expenses were $115,200. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Less or Plus and colons will automatically appear if it is required. In your computations, round unit costs to two decimal places and round final answers to the nearest dollar.

B.

Reconcile the absorption costing income from operations of $1,656,000 with the variable costing income from operations determined in (A).

A. Prepare a variable costing income statement, assuming that the fixed manufacturing costs were $132,000 and the variable selling and administrative expenses were $115,200. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Less or Plus and colons will automatically appear if it is required. In your computations, round unit costs to two decimal places and round final answers to the nearest dollar.

Rhys Company

Income Statement - Variable Costing

For the Month Ended July 31, 2016

1
2
3
4
5
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7
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9
10
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B. Reconcile the absorption costing income from operations of $1,656,000 with the variable costing income from operations previously determined.

Rhys Company

Income from Operations - Absorption vs. Variable Costing

For the Month Ended July 31, 2016

1	Absorption costing income from operations
2	Variable costing income from operations
3	Difference

Labels and Amount Descriptions
Contribution margin
Cost of goods manufactured
Ending inventory
Fixed costs
Fixed manufacturing costs
Fixed selling and administrative expenses
Gross profit
Income from operations
Manufacturing margin
Sales
Variable cost of goods manufactured
Variable cost of goods sold
Variable selling and administrative expenses