Question
Variable Costing Income Statement On July 31, 2016, the end of the first month of operations, Holton Company prepared the following income statement, based on
Variable Costing Income Statement
On July 31, 2016, the end of the first month of operations, Holton Company prepared the following income statement, based on the absorption costing concept:
Sales (18,000 units) | $972,000 | ||||
Cost of goods sold: | |||||
Cost of goods manufactured | $748,000 | ||||
Less ending inventory (4,000 units) | 136,000 | ||||
Cost of goods sold | 612,000 | ||||
Gross profit | $360,000 | ||||
Selling and administrative expenses | 68,000 | ||||
Income from operations | $292,000 |
a. Prepare a variable costing income statement, assuming that the fixed manufacturing costs were $44,000 and the variable selling and administrative expenses were $31,000. In your computations, round unit costs to two decimal places and round final answers to the nearest dollar.
Holton Company | ||
Income Statement-Variable Costing | ||
For the Month Ended July 31, 2016 | ||
Sales | $ | |
Variable cost of goods sold: | ||
Variable cost of goods manufactured | $ | |
Less ending inventory | ||
Variable cost of goods sold | ||
Manufacturing margin | $ | |
Variable selling and administrative expenses | ||
Contribution margin | $ | |
Fixed costs: | ||
Fixed manufacturing costs | $ | |
Fixed selling and administrative expenses | ||
Income from operations | $ |
b. Reconcile the absorption costing income from operations of $292,000 with the variable costing income from operations determined in (a).
Reconciliation of Absorption and Variable Costing Income | |
Absorption costing income from operations | $ |
Variable costing income from operations | |
Difference | $ |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started