Question

Question Help Marlo's Ice Cream Shoppe sold 9,000 servings of ice cream during June for $3 per serving. Mario purchases the ice cream in large tubs from the Deluxe Ice Cream Company. Each tub costs Marlo $11 and has enough ice cream to fill 20 ice cream cones. Marlo purchases the ice cream cones for $0.25 each from a local warehouse club. Marlo's Shoppe is located in a local strip mall, and she pays $1,900 a month to lease the space. Mario expenses $290 a month for the depreciation of the shop's furniture and equipment. During June, Marlo incurred an additional $3,000 of other operating expenses (76% of these were fixed costs). Requirements 1. Prepare Mario's June income statement using a traditional format 2. Prepare Marlo's June income statement using a contribution margin format Requirement 1. Prepare Marlo's June Income statement using a traditional format. Marlo's Ice Cream Shoppe Income Statement our For the Month Ended June 30 udy Operating expenses: D Choose from any list or enter any number in the input fields and then click Check Answer

Answer 1

Under Absorption costing, both variable as well as fixed manufacturing costs are considered as product costs; On the other hand, under variable costing, variable manufacturing cost only is considered as product costs. In simple words, fixed manufacturing costs shall be considered as period costs and to be charged as expense for the period in which fixed manufacturing costs were incurred. 1) 2) $27,000 $27,000 (9,000 cones x $3 each] $7,200 [9,000 cones x ($11/20 + $0.25)] $19,800 Marlo's Ice Cream Shoppe Income Statement For the Month Ended June 30 Sale Revenue Cost of Goods Sold Gross Profit Operating Expenses: Lease Expense $1,900 Depreciation Expense $290 Other Operating Expenses $3,000 Total Operating Expenses Net Operating Income $7,200 $750 Marlo's Ice Cream Shoppe Income Statement For the Month Ended June 30 Sale Revenue Variable Costs and Expenses Cost of Goods Sold Other Operating Expenses Total Variable Costs & Expenses Contribution Margin Fixed Expenses: Lease Expense Depreciation Expense Other Operating Expenses Total Operating Expenses Net Operating Income ($3000 x 25%] $7,950 $19,050 $5,190 $14,610 $1,900 $290 $2,250 [$3000 x 75%] $4,440 $14,610