Hayek Bikes prepares the income statement under variable costing for its managerial reports, and it prepares the income statement under absorption costing for external reporting. For its first month of operations, 350 bikes were produced and 225 were sold; this left 125 bikes in ending inventory. The income statement information under variable costing follows. Sales (225 x $1,600) Variable product cost (225 x $625) Variable selling and administrative expenses (225 x $55) Contribution margin Fixed overhead cost Fixed selling and administrative expense Net income 1. Prepare this company's income statement for its first month of operations under absorption costing. (Round your intermediate calculations to the nearest whole dollar.) HAYEK BIKES Absorption Costing Income Statement Sales Less: Cost of goods sold Variable product costs Fixed overhead costs Cost of goods sold Gross margin Selling general and administrative expenses Fixed selling and administrative costs Variable selling and administrative expenses Net income (loss) Net income under absorption costing is higher than net income under variable costing by: $360,000 140,625 12,375 207,000 70,000 85,000 $ 52,000 Fixed costs added to inventory $360,000

Hayek Bikes prepares the income statement under variable costing for its managerial reports, and it prepares the income statement under absorption costing for external reporting. For its first month of operations, 350 bikes were produced and 225 were sold; this left 125 bikes in ending inventory. The income statement information under variable costing follows. Sales (225 x $1,600) Variable product cost (225 x $625) Variable selling and administrative expenses (225 x $55) Contribution margin Fixed overhead cost Fixed selling and administrative expense Net income 1. Prepare this company's income statement for its first month of operations under absorption costing. (Round your intermediate calculations to the nearest whole dollar.) HAYEK BIKES Absorption Costing Income Statement Sales Less: Cost of goods sold Variable product costs Fixed overhead costs Cost of goods sold Gross margin Selling general and administrative expenses Fixed selling and administrative costs Variable selling and administrative expenses Net income (loss) Net income under absorption costing is higher than net income under variable costing by: $360,000 140,625 12,375 207,000 70,000 85,000 $ 52,000 Fixed costs added to inventory $360,000

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter7: Variable Costing For Management analysis

Section: Chapter Questions

Problem 1PB: Absorption and variable costing income statements During the first month of operations ended July...

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Hayek Bikes prepares the income statement under variable costing for its managerial reports, and it prepares the income statement under absorption costing for external reporting. For its first month of operations, 400 bikes were produced and 240 were sold. Income statement information under variable costing follows. Sales (240 \times $ 1,725) $414,000 Variable cost of goods sold (240 \times $600) 144,000 Variable selling and administrative expenses (240 \times $70) 16,800 Contribution margin 253,200 Fixed overhead 68,000 Fixed selling and administrative expenses 85,000 Income $ 100, 200 Prepare the company's income statement under absorption costing.