FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Variable Costing Income Statement
On July 31, the end of the first month of operations, Rhys Company prepared the following income statement, based on the absorption costing concept:
Sales (25,000 units)
$1,700,000
Cost of goods sold:
Cost of goods manufactured
$1,312,500
Less ending inventory (5,000 units)
218,750
Cost of goods sold
1,093,750
Gross profit
$606,250
Selling and administrative expenses
141,000
Income from operations
$465,250
a. Prepare a variable costing income statement, assuming that the fixed manufacturing costs were $90,000 and the variable selling and administrative expenses were $64,000. In your computations, round unit
costs to two decimal places and round final answers to the nearest dollar.
Rhys Company
Income Statement-Variable Costing
For the Month Ended July 31
Sales
1,700,000
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
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Transcribed Image Text:Variable Costing Income Statement On July 31, the end of the first month of operations, Rhys Company prepared the following income statement, based on the absorption costing concept: Sales (25,000 units) $1,700,000 Cost of goods sold: Cost of goods manufactured $1,312,500 Less ending inventory (5,000 units) 218,750 Cost of goods sold 1,093,750 Gross profit $606,250 Selling and administrative expenses 141,000 Income from operations $465,250 a. Prepare a variable costing income statement, assuming that the fixed manufacturing costs were $90,000 and the variable selling and administrative expenses were $64,000. In your computations, round unit costs to two decimal places and round final answers to the nearest dollar. Rhys Company Income Statement-Variable Costing For the Month Ended July 31 Sales 1,700,000 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 $465,250 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
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Transcribed Image Text:b. Reconcile the absorption costing income from operations of $465,250 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
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