FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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V. Prepare a CONTRIBUTION MARGIN (also known as variable costing)
income statement given a traditional (also known as absorption costing)
income statement
Bruno Industries manufactures and sells a single product. The controller has
prepared the following income statement for the most recent year:
B
C
D
1
2
3
Bruno Industries
Traditional Income Statement (Absorption Costing)
For the Year Ended December 31
4
5
Sales revenue
6
Less: Cost of goods sold
7
Gross profit
8
Less: Operating expenses
9 Operating income
$ 406,000
329,000
$
77,000
73,000
$
4,000
10
The company produced 8,000 units and sold 7,000 units during the year ending
December 31. Fixed manufacturing overhead (MOH) for the year was $152,000,
while fixed operating expenses were $62,000. The company had no beginning
inventory.
Requirements
1. Will the company's operating income under variable costing be higher,
lower, or the same as its operating income under absorption costing? Why?
2. Prepare a variable costing income statement for the year.
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Transcribed Image Text:V. Prepare a CONTRIBUTION MARGIN (also known as variable costing) income statement given a traditional (also known as absorption costing) income statement Bruno Industries manufactures and sells a single product. The controller has prepared the following income statement for the most recent year: B C D 1 2 3 Bruno Industries Traditional Income Statement (Absorption Costing) For the Year Ended December 31 4 5 Sales revenue 6 Less: Cost of goods sold 7 Gross profit 8 Less: Operating expenses 9 Operating income $ 406,000 329,000 $ 77,000 73,000 $ 4,000 10 The company produced 8,000 units and sold 7,000 units during the year ending December 31. Fixed manufacturing overhead (MOH) for the year was $152,000, while fixed operating expenses were $62,000. The company had no beginning inventory. Requirements 1. Will the company's operating income under variable costing be higher, lower, or the same as its operating income under absorption costing? Why? 2. Prepare a variable costing income statement for the year.
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