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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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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- Variable and Absorption Costing-Service CompanyReally BC, Inc. prepares a variable costing income statement for internal management and an absorption costing income statement for its bank. Really BC provides a quarterly lawn care service that is sold for $190. The variable and fixed cost data are as follows: Direct labor $100.00 Overhead Variable cost per unit $33.00 Fixed cost (annual) $100,000 Marketing, general and administrative Variable cost (per service contract completed) $34.00 Administrative expenses (fixed- annual cost) $42,000 During 2016, 10,000 service contracts were signed and 9,500 service contracts were completed. Lawn RX had no service contracts at the beginning of the year. a. Calculate reported income for management.Do not use negative signs with any answers. Absorption Costing Income Statement Sales Answer Cost of Goods Sold: Beginning Inventory Answer Variable…arrow_forwardPlease do not give solution in image format thankuarrow_forwardIncome Statements under Absorption Costing and Variable Costing Gallatin County Motors Inc. assembles and sells snowmobile engines. The company began operations on July 1 and operated at 100% of capacity during the first month. The following data summarize the results for July: Sales (4,000 units) $2,600,000 Production costs (4,350 units): Direct materials Direct labor Variable factory overhead Fixed factory overhead Selling and administrative expenses: Variable selling and administrative expenses Fixed selling and administrative expenses Sales a. Prepare an income statement according to the absorption costing concept. Gallatin County Motors Inc. Absorption Costing Income Statement For the Month Ended July 31 $ 2,600,000 Cost of goods sold Gross profit 1,800,000 $1,218,000 522,000 87,000 130,500 1,957,500 $ 800,000 $60,000 25,000 85,000arrow_forward
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