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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