PA15. LO 6.5 Happy Trails has this information for its manufacturing:

Its income statement under absorption costing is:

Prepare an income statement with variable costing and a reconciliation statement between both methods.

Solution

Variable Costing Income Statement
Sales	1,900,500
Beginning Inventory	0
Cost of Goods Manufactured
Cost of Goods Available for Sale
Ending Inventory
Cost of Goods Sold
Gross Profit
Sales and Administrative Expenses
Variable
Contribution Margin
Fixed Sales and Administrative Expenses
Fixed Manufacturing Overhead
Total Sales and Administrative Expenses
Net Operating Income
Reconciliation
Net Operating Income: Variable
Fixed Manufacturing Overhead Deferred in Inventory
Net Operating Income: Absorption