Question

Question 1 Net templete Marked out of 5.00 P eque Variable and Absorption Costing Service Company Lawn RX, Inc. prepares a variable costing income statement for internal management and an absorption costing income statement for its bank. Lawn RX provides a quarterly Lawn care service that is sold for $140. The variable and fixed cost data are as follows Direct labor Overhead Variable cost per unit Fixed cost annual Marketing eral and ad v e Varico per rice cortom During 2019, 10,000 service contracts were signed and 900 service contracts were completed. Lawn Rox had no service contracts at the beginning of the year a. Calculate reported income for management. Do not use negative signs with any answers Absorption Cesting income statement b. Calculate reported income for the bank Do not use negatives with an answers Variable Costi come statement

Answer 1

Note: Ending inventory = 10,000-9,800 = 200 service contracts

Y Absorption costing income statement 2 Sales $ 1,372,000 3 Cost of goods sold 4 Beginning iventory 5 Variable costs $ 850,000 6 Fixed costs $ 100,000 7 Less: Ending inventory $ 19,000 8 Cost of goods sold $ 931,000 9 Gross profit $ 441,000 10 Selling expense $ 58,800 11 Administrative expense $ 42,000 12 Net income $ 340,200 13 14 Variable costing income statement 15 Sales $ 1,372,000 16 Cost of goods sold 17 Beginning inventory $ 18 Variable costs $ 850,000 19 Less: Ending inventory $ 17,000 20 Variable cost of goods sold $ 833,000 21 Variable selling expense $ 58,800 22 Contribution margin $ 480,200 23 Fixed costs 24 Overhead cost $ 100,000 25 Administrative expense $ 42,000 26 Total fixed cost $ 142,000 27 Net income $ 338,200

1 Absorption costing income statement 2 Sales =140*9800 3 Cost of goods sold 4 Beginning iventory 5 Variable costs =10000*(80+5) 6 Fixed costs 100000 7 Less: Ending inventory =+(B5+B6)/10000*200 8 Cost of goods sold =+B5+B6-B7 9 Gross profit =+C2-C8 10 Selling expense =9800*6 11 Administrative expense 42000 12 Net income =+C9-C10-C11 13 14 Variable costing income statement 15 Sales =140*9800 16 Cost of goods sold 17 Beginning inventory 18 Variable costs =10000*(80+5) 19 Less: Ending inventory =+B18/10000*200 20 Variable cost of goods sold =+B18-B19 21 Variable selling expense =9800*6 22 Contribution margin =+C15-C20-C21 23 Fixed costs 24 Overhead cost 100000 25 Administrative expense 42000 26 Total fixed cost =+B25+B24 27 Net income =+C22-C26