Problem 8-16 Comparison of Costing Methods [LO1, LO2, LO3, LO4]

Alta Products Ltd. has just created a new division to manufacture and sell personal video recorders (PVRs). The facility is highly automated and so has high monthly fixed costs, as shown in the following schedule of budgeted monthly costs. This schedule was prepared based on an expectation of a monthly production volume of 1,500 units.

During August, the following activity was recorded:

Units produced		1,500
Units sold		1,200
Selling price per unit	$	275

Manufacturing costs:
Variable cost per unit:
Direct material	$	100
Direct labour		40
Variable overhead		10
Total fixed overhead	$	90,000
Selling and administrative costs:
Variable		5	% of sales
Fixed		60,000

Required:
1.	Prepare an income statement for the month ended August 31, under absorption costing. (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

ALTA PRODUCTS LTD.
Absorption Costing Income Statement
For month ended August 31
(Click to select)Variable cost of goods soldCost of goods manufacturedSalesDirect materialFinished goods, beginning inventory		$
Cost of goods sold:
(Click to select)Finished goods, beginning inventorySalesVariable cost of goods soldDirect materialCost of goods manufactured	$
(Click to select)SalesFinished goods, beginning inventoryCost of goods manufacturedVariable cost of goods soldDirect material
(Click to select)Add: Beginning inventoryAdd: Desired ending inventoryLess: Finished goods, ending inventoryAdd: Finished goods, ending inventoryLess: Beginning inventory
(Click to select)Contribution marginGross profit
Selling and administrative costs:
(Click to select)VariableFixedDirect materialDirect labourVariable overhead
(Click to select)VariableDirect labourVariable overheadDirect materialFixed
(Click to select)Operating incomeOperating loss		$

2.	Prepare an income statement for the month ended August 31, under variable costing. (Loss amounts should be indicated by a minus sign. Omit the "$" sign in your response.)

ALTA PRODUCTS LTD.
Variable Costing Income Statement
For month ended August 31
(Click to select)SalesCost of salesSelling and administrativeGoods available for saleDirect material		$
Less: Variable costs:
(Click to select)SalesCost of salesSelling and administrativeGoods available for saleDirect labour
(Click to select)SalesCost of salesSelling and administrativeGoods available for saleDirect material
(Click to select)Contribution marginGross profit
Less: Fixed costs:
(Click to select)FixedDirect labourOverheadSelling and administrativeVariable
(Click to select)Direct labourOverheadSelling and administrativeVariableFixed
(Click to select)Operating incomeOperating loss		$

3.	Beginning with absorption costing, reconcile the absorption costing and variable costing income figures for the month. (Negative amounts should be indicated by a minus sign. Omit the "$" sign in your response.)

Operating income under absorption costing	$
Less: Fixed costs deferred in inventory
Operating income under variable costing	$