QS 19-11 Converting variable costing income to absorption costing LO P3

Diaz Company reports the following variable costing income statement for its single product. This companys sales totaled 50,000 units, but its production was 80,000 units. It had no beginning finished goods inventory for the current period.

DIAZ COMPANY Income Statement (Variable Costing)
Sales (50,000 units $60 per unit)	$	3,000,000
Variable expenses
Variable manufacturing expense (50,000 units $28 per unit)		1,400,000
Variable selling and admin. expense (50,000 units $5 per unit)		250,000
Total variable expenses		1,650,000
Contribution margin		1,350,000
Fixed expenses
Fixed overhead		320,000
Fixed selling and administrative expense		160,000
Total fixed expenses		480,000
Net income	$	870,000

1. Convert Diaz's variable costing income statement to an absorption costing income statement. 2. Fill in the blanks:

Required 1 Required 2 Convert Diaz's variable costing income statement to an absorption costing income statement. DIAZ COMPANY $ 3,000,000 Absorption Costing Income Statement Sales Less: Cost of goods sold Variable manufacturing costs $ 1,400,000 Fixed overhead costs 200,000 1,600,000 140,000 Cost of goods sold Gross margin Selling general and administrative expenses Fixed selling and administrative costs Variable selling and administrative expenses 160.000 250,000 Total fixed expenses Net income (loss) 410.000 990.000 S Required 2 > 5. quired 1 Required 2 vert Diaz's variable costing income statement to an absorption costing income stati ints DIAZ COMPANY Absorption Costing Income Statement $ 3.000.000 Box XS Cost of goods sold riable overhead costs red overhead costs 2.240.000 x 320 000 2,560,000 140,000 of goods sold 3 margin g general and administrative expenses ced selling and administrative costs riable selling and administrative expenses 160.000 250.000 fixed expenses 410.000 990.000 S ncome (loss) Required 2 >