Question

Show Your Works How You DO It: Fill out 3 white blanks Larry's Foods produces frozen meals, which it sells for $7 each. The company uses the FIFO inventory costing method, and it computes a new monthly fixed manufacturing overhead rate based on the actual number of meals produced that month. All costs and production levels are exactly as planned. The following data are from the company's first two months in business: Requirement 2a. Prepare separate monthly income statements for January and for February, using absorption costing. Data Table Larry's Foods Income Statement (Absorption Costing) Month Ended January 31 Sales revenue 4,690 Less: Cost of goods sold Gross profit Less: Operating expenses January 1,400 meals 2,000 meals 3 1 700 600 Sales............................................... Production............ Variable manufacturing expense per meal...........S Sales commission expense per meal..............S Total fixed manufacturing overhead.................$ Total fixed marketing and administrative expenses... .S 2,000 February 1,600 meals 1,400 meals 3 1 700 600 S S $ S Operating income Print Done

Answer 1

Larry's Foods Income Statement (Absorption Costing) Month Ended January 31 Sales revenue 9,800 Less: Cost of goods sold 4,690 Gross Profit 5,110 Less: Operating expenses 2,000 Operating Income 3,110 1,400 Working Notes Number of Meal Sold Sales price per meal Sales revenue (1,400 x 7) Gross Profit (9,800 - 4,690) 800-4690) Operating Income (5,110 - 2,000) 9,800 5,110 3,110