Question

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 $155. The variable and fixed cost data are as follows:

Direct labor				$100.00
Overhead
Variable cost per unit				$7
Fixed cost (annual)				$100,000
Marketing, general and administrative
Variable cost (per service contract completed)				$8
Administrative expenses (fixed- annual cost)				$42,000

During 2016, 10,000 service contracts were signed and 9,500 service contracts were completed. Lawn RX 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 Costing Income Statement
Sales				Answer
Cost of Goods Sold:
Beginning Inventory			Answer
Variable Costs			Answer
Fixed Cost			Answer
Less: Ending Inventory			Answer
Cost of Goods Sold				Answer
AnswerContribution marginGross profitLess: Ending inventorySelling expenseOverhead cost				Answer
AnswerContribution marginGross profitLess: Ending inventorySelling expenseOverhead cost				Answer
Administrative expense				Answer
Net Income				Answer

b. Calculate reported income for the bank.
Do not use negative signs with any answers.

Variable Costing Income Statement
Sales				Answer
Cost of Goods Sold:
Beginning Inventory			Answer
Variable Costs			Answer
AnswerContribution marginGross profitLess: Ending inventoryOverhead costVariableselling expense			Answer
Variable cost of goods sold				Answer
AnswerContribution marginGross profitLess: Ending inventoryOverhead costVariable sellingexpense				Answer
AnswerContribution marginGross profitLess: Ending inventoryOverhead costVariableselling expense				Answer
Fixed costs:
AnswerContribution marginGross profitLess: Ending inventoryOverhead costVariable sellingexpense			Answer
Administrative Expense			Answer
Total Fixed Cost				Answer
Net Income				Answer

Please answer all parts of the question.

Answer 1

1472500 Answer of Part 1: Absorption Costing Income Statement Sales (9,500*$155) Cost of Goods Sold: Beginning Inventory Variable Cost (10,000*$107) 1070000 Fixed Cost 100000 Less: Ending Inventory (500*$117) 58500 Cost of Goods Sold Gross Profit Less: Selling Expenses (9,500*$8) Less: Administrative Expense Net income 1111500 361000 76000 420001 243000 Calcualtion: Unit Product Cost = Direct Labor + Variable Overhead Cost + Fixed Overhead Cost Unit Product Cost = $100 + $7 + ($100,000/10,000) Unit Product Cost = $100 + $7 + $10 Unit Product Cost = $117 1472500 Answer of Part 2: Variable Income Statement Sales (9,500*$155) Cost of Goods Sold: Beginning Inventory Variable Cost (10,000*$107) 1070000 Less: Ending Inventory (500*$107) 53500 Variable Cost of Goods Sold Less:Variable Selling Expense Contribution Margin Fixed Costs: Fixed Overhead Cost 100000 Fixed Administrative Expense 42000 Total Fixed Cost Net Income 1016500 760001 380000 142000) 238000