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	$