Required a. Calculate reported income for management. b. Calculate reported income for the bank. c. Reconcile the two income amounts.
Required a. Calculate reported income for management. b. Calculate reported income for the bank. c. Reconcile the two income amounts.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
E7-2A | Variable and Absorption Costing--Service Company | ||||||||||
Lawn RX, Inc. prepares a variable costing income statement for internal management and an absorption costing income statement for its bank. Lawn RX provides a quarterly lawn care service that is sold for $140. The variable and fixed cost data are as follows: | |||||||||||
Direct labor | $ 80 | ||||||||||
Variable cost per unit | $ 5 | ||||||||||
Fixed cost | $ 100,000 | ||||||||||
Marketing, general, and administrative: | |||||||||||
Variable cost (per contract completed) | $ 6 | ||||||||||
Administrative expense (fixed) (per month) | $ 42,000 | ||||||||||
During 2019, 10,000 service contracts were signed and 9,800 service contracts were completed. Lawn RX had no service contracts at the beginning of the year. | |||||||||||
Required | |||||||||||
a. Calculate reported income for management. | |||||||||||
b. Calculate reported income for the bank. | |||||||||||
c. Reconcile the two income amounts. |
|
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