Question
On July 31, the end of the first month of operations, Rhys Company prepared the following income statement, based on theabsorption costingconcept: Sales (96,000 units)$4,440,000Cost
On July 31, the end of the first month of operations, Rhys Company prepared the following income statement, based on theabsorption costingconcept:
Sales (96,000 units)$4,440,000Cost of goods sold:Cost of goods manufactured$3,120,000Less ending inventory (24,000 units)624,000Cost of goods sold2,496,000Gross profit$1,944,000Selling and administrative expenses288,000Income from operations$1,656,000
a. variable costing income statement, assuming that the fixed manufacturing costs were $132,000 and the variable selling and administrative expenses were $115,200. In your computations, round unit costs to two decimal places and round final answers to the nearest dollar.
Rhys CompanyIncome Statement-Variable CostingFor the Month Ended July 31Sales
$Variable cost of goods sold:Variable cost of goods manufactured
$Less ending inventory
Variable cost of goods sold
Manufacturing margin
$Variable selling and administrative expenses
Contribution margin
$Fixed costs:Fixed manufacturing costs
$Fixed selling and administrative expenses
Income from operations$
b.Reconcile the absorption costing income from operations of $1,656,000 with the variable costing income from operations determined in (a).
Reconciliation of Absorption and Variable Costing IncomeAbsorption costing income from operations$Variable costing income from operationsDifference$
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b. How is factory overhead reported in each of the two income statements?
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