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Instructions 1. Using the absorption costing concept, prepare income statements for (a) May and (b) June. 2. Using the variable costing concept, prepare income statements

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Instructions 1. Using the absorption costing concept, prepare income statements for (a) May and (b) June. 2. Using the variable costing concept, prepare income statements for (a) May and (b) June. 2DiVinci Art Supply Company sells artistic supplies to retailers in three different states, Texas, Oklahoma, and Kansas. The following profit analysis by state was prepared by the company: Texas Oklahoma Kansas Revenue $320,000 $380,000 $300,000 Cost of goods sold 160,000 200,000 150,000 Gross profit $160,000 $180,000 $150,000 Selling expenses 100,000 80,000 50,000 Income from operations $ 60,000 $100,000 $100,000 The following fixed costs have also been provided: Texas Oklahoma Kansas Fixed manufacturing costs $70,000 $40,000 $40,000 Fixed selling expenses 60,000 30,000 20,000 In addition, assume that inventories have been negligible. Management believes it could increase state sales by 2596, without increasing any of the fixed costs, by spending an additional $10,000 per state on advertising. 1. Prepare a contribution margin by state report for DiVinci Art Supply Company. 2. Determine how much state operating profit will be generated for an additional $10,000 per state on advertising. 3. Which state will provide the greatest profit return for a $10,000 increase in advertising? Why

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