Question

Sook Calculator me following data were adapted from a recent income statement of The Procter & Gamble (in millions) Sales $65,058 Operating costs: Cost of products sold $(32,535) Marketing, administrative, and other expenses (18,568) Total operating costs $(51,103) Operating income $13,955 Assume that the variable amount of each category of operating costs is as follows: (in millions) Cost of products sold $19,500 Marketing, administrative, and other expenses 14,000 a. Based on the data given, prepare a variable costing income statement for Procter & Gamble, assu The Procter & Gamble Company Variable Costing Income Statement (assumed) (in millions) Sales Variable cost of products sold Manufacturing margin Variable marketing, administrative, and other expenses Contribution margin Fixed costs: Check My Work 3 more Check My Work uses remaining - saved

Answer 1

Prepare variable costing income statement as follows: Variable costing income statement Sales Variable cost of products sold Manufacturing margins Variable marketing, administration, and other expenses Contribution margin Fixed costs: Fixed manufacturing costs ($32,535-$19,500) Fixed manufacturing, administrative, and other expenses ($18,568-$14,000) Total fixed costs Operating Income 65,058 19,500 45,558 14,000 31,558 13,035 4,568 17,603 13.955 If P&G reduced its inventories during the period, then the cost of products sold would higher fixed costs allocated to the beginning inventories. Thus, the total fixed costs of products sold on the absorption costing income statement would be higher, and the operating income would be lower.