Question

Absorption and Variable Costing Income Statements

During the first month of operations ended July 31, YoSan Inc. manufactured 11,600 flat panel televisions, of which 10,900 were sold. Operating data for the month are summarized as follows:

$1,308,000 Sales Manufacturing costs: Direct materials $649,600 197,200 Direct labor Variable manufacturing cost 162,400 81,200 Fixed manufacturing cost 1,090,400 Selling and administrative expenses: $109,000 Variable 50,100 159,100 Fixed

1. Prepare an income statement based on the absorption costing concept.

2. Prepare an income statement based on the variable costing concept.

Answer 1

1.Income statement under Absorption costing

sales		1,308,000
less:cost of goods sold
Direct materials (649,600*10,900/11,600)	610,400
direct labor (197,200*10,900/11,600)	185,300
variable manufacturing cost (162,400*10,900/11,600)	152,600
fixed manufacturing cost (81,200*10,900/11,600)	76,300	(1,024,600)
gross profit		283,400
less:selling and administrative costs
variable selling and administrative cost	109,000
fixed selling and administrative cost	50,100	(159,100)
net income		124,300

2.variable cost income statement:

sales		1,308,000
less: variable costs
direct materials	610,400
direct labor	185,300
variable manufacturing cost	152,600
variable selling and administrative cost	109,000	(1,057,300)
contribution margin		250,700
less:fixed costs
fixed manufacturing cost	81,200
fixed selling and administrative expense	50,100	(131,300)
net income		119,400