Question

Show Your Works How You Do It: Fill Out 4 White Blanks Below 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: A Data Table Requirement 2b. Prepare Larry's Foods' January and February income statements using variable costing. Larry's Foods Contribution Margin Income Statement (Variable Costing) Month Ended January 31 February 28 Sales revenue $ 9,800 $ 11,200 Less: Variable expenses Variable cost of goods sold 4,200 4,800 1.400 Variable operating expenses 1,600 Contribution margin January February Sales Production Variable manufacturing expense per meal ...........S Sales commission expense per meal ..............S Total fixed manufacturing overhead ..............S Total fixed marketing and administrative expenses ....S 1,400 meals 2,000 meals 3 1 700 600 S S S S 1,600 meals 1.400 meals 3 1 700 600 Less: Fixed expenses Fixed manufacturing overhead Fixed operating expenses Print Done Operating income

Answer 1

Solution

Larry's Foods
Contribution margin income statement
Month ended
	January 31	February 28
Sales revenue	$ 9,800.00	$ 11,200.00
Less: Variable expenses
Variable cost of goods sold	$ 4,200.00	$    4,800.00
Variable operating expense	$ 1,400.00	$    1,600.00
Contribution margin	$ 4,200.00*	$    4,800.00
Less: Fixed expenses
Fixed manufacturing overhead	$     700.00	$        700.00
Fixed operating expenses	$     600.00	$        600.00
Operating income	$ 2,900.00**	$    3,500.00

*Contribution margin = Sales revenue minus Variable cost of goods sold and minus variable operating expense.

**Operating income = Contribution margin minus fixed costs both