Variable and Absorption Costing

Ansara Company had the following abbreviated income statement for the year ended December 31, 20Y2:

(in millions)
Sales	$26,610
Cost of goods sold	$22,620
Selling, administrative, and other expenses	2,390
Total expenses	$25,010
Income from operations	$1,600

Assume that there were $5,850 million fixed manufacturing costs and $1,330 million fixed selling, administrative, and other costs for the year. The finished goods inventories at the beginning and end of the year from the balance sheet were as follows:

January 1	$3,190 million
December 31	$3,730 million

Assume that 20% of the beginning and ending inventory consists of fixed costs. Assume work in process and materials inventory were unchanged during the period.

Question Content Area

a. Prepare an income statement according to the variable costing concept for Ansara Company for 20Y2

Sale

Variable cost of goods sold:

Beginning inventory

Variable cost of goods manufactured

Ending inventory

Total variable cost of goods sold

Manufacturing margin

Variable selling and administrative expenses

Contribution margin

Fixed Cost:

Fixed manufacturing costs

Fixed selling and expenses

total fixed costs

income from operations