VARIABLE COSTING INCOME STATEMENT INFORMATION

ABSORPTION COSTING INCOME STATEMENT

Suppose that in 20X1 production was 16,000 computers instead of 14,200 computers, and sales were 15,400 computers. Also assume that the net variances for all variable manufacturing costs were $21,000, unfavorable. Also assume that actual fixed manufacturing costs were $1,118,000. Requirement 1. Prepare income statements for 20X1 under variable costing and under absorption costing. Begin by preparing the variable costing income statement. (Enter amounts in thousands of dollars.) 13860 Sales Opening inventory, at variable standard costs of $600 Add: variable cost of goods manufactured Available for sale Deduct: ending inventory, at variable standard cost of $600 Variable cost of goods sold, at standard Net flexible-budget variances for all variable costs, unfavorable Variable cost of goods sold, at actual Variable selling expenses, at 5% of dollar sales Total variable costs charged against sales Contribution margin Fixed factory overhead Fixed selling and administrative expenses Total fixed expenses Operating income i Variable-costing method $ 12,780,000 $ 14,940,000 Sales, 14,200 and 16,600 computers, respectively Variable expenses: Variable manufacturing cost of goods sold Opening inventory, at standard variable costs of $600 Add: variable cost of goods manufactured at standard, 17,800 and 14,200 computers, respectively $ 0 $ 2,160,000 10,680,000 8,520,000 Available for sale, 17 800 computers in each year $ 10,680,000 2,160,000 $ 10,680,000 720,000 ** Deduct: ending inventory, at standard variable cost of $600 Variable manufacturing cost of goods sold Variable selling expenses, at 5% of dollar sales $ $ 8,520,000 639,000 9,960,000 747,000 9,159,000 10.707,000 $ 3,621,000 $ 4,233,000 Total variable expenses Contribution margin Fixed expenses Fixed factory overhead $ $ 1,078,000 800,000 1,078,000 800,000 Fixed selling and administrative expenses 1,878,000 Total fixed expenses 1,878,000 1,743,000 $ $ 2,355,000 1,878,000 Total fixed expenses 1,878,000 2,355,000 $ 1,743,000 $ = Operating income, variable costing *3,600 computers at $600 = $2,160,000 **1,200 computers at $600 = $720,000 i Absorption-costing method 20x0 20X1 $ 12,780,000 $ 14,940,000 0 11,926,000 $ 2,412,000 9,514,000 Sales Cost of goods sold: Opening inventory, at standard absorption cost of $670* Cost of goods manufactured at standard of $670 Available for sale Deduct: ending inventory at standard absorption cost of $670 Cost of goods sold, at standard Gross profit at standard 11,926,000 2,412,000 11.926.000 804,000 - 9,514,000 11,122,000 3,266,000 168,000 3,818,000 84,000 Production-volume variance** Gross margin or gross profit, at "actual" 3,434,000 1,439,000 1,995,000 3,734,000 1,547,000 Selling and administrative expenses $ 2,187,000 Operating income *Variable cost $ 600 Fixed cost ($1,078,000 / 15,400) 70 $ 670 Standard absorption cost ** Computation of production-volume variance based on expected volume of production of 15,400 computers: 20X0 $ 168,000 F (17,800 - 15,400) x $70 20x1_ 84,000 U (14,200 - 15,400)