Variable and Absorption Costing$-$Service Company

Jensen's Tailoring provides custom tailoring services. After the company's first year of operations, its owner prepared the following summarized data report for the year

a$.$ Prepare an income statement based on full absorption costing.

b$.$ Prepare an income statement based on variable costing.

c$.$ Assume that you must decide quickly whether to accept a special one$-$time order to alter $50$ band costumes for $$225$ per costume.

Which income statement presents the most relevant data? variable costing ${?}^{}$

Determine the apparent profit or loss on the special order based solely on these data.

Use a negative sign with your answer if the special order creates an apparent loss. Round answer to the nearest whole number.

qVariable and Absorption Costing$-$Service Company

Jensen's Tailoring provides custom tailoring services. After the company's first year of operations, its owner prepared the following summarized data report for the year

Sales $(500$ completed jobs$)$ $$150,000$

Tailoring costs $(550$ jobs$)$

Direct labor $70,500$

Manufacturing overhead

Variable $18,000$

Fixed $13,500$

Operating expenses

Variable $8,400$

Fixed $8,700$

a$.$ Prepare an income statement based on full absorption costing.

Only use a negative sign with your answer for net income $($loss$),$ if the answer represents a net loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable.

Absorption Costing Income Statement

Sales Answer

$150000$

Cost of Goods Sold:

Beginning Inventory Answer

$0$

Direct labor Answer

$70500$

Answer

Manufacturing overhead

Answer

$31500$

Less: Ending Inventory Answer

$9273$

Cost of Goods Sold Answer

$92727$

Answer

Gross profit

Answer

$57273$

Answer

Operating expenses

Answer

$17100$

Net Income $($Loss$)$ Answer

$40173$

b$.$ Prepare an income statement based on variable costing.

Only use a negative sign with your answer for net income $($loss$),$ if the answer represents a net loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable.

Variable Costing Income Statement

Sales Answer

$150000$

Variable cost of Goods Sold:

Beginning Inventory Answer

$0$

Direct labor Answer

$70500$

Answer

Variable manufacturing overhead

Answer

$18000$

Less: Ending Inventory Answer

$8045$

Variable cost of goods sold Answer

$80455$

Answer

Variable operating expenses

Answer

$8400$

Answer

Contribution margin

Answer

$61145$

Fixed costs:

Answer

Manufacturing overhead

Answer

$13500$

Operating expenses Answer

$8700$

Total Fixed Cost Answer

$22200$

Net Income $($Loss$)$ Answer

$38945$

c$.$ Assume that you must decide quickly whether to accept a special one$-$time order to alter $50$ band costumes for $$225$ per costume.

Which income statement presents the most relevant data? Answer

variable costing

Determine the apparent profit or loss on the special order based solely on these data.

Use a negative sign with your answer if the special order creates an apparent loss. Round answer to the nearest whole number.

$Answer