Question

please fill out a and b

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 $175. The variable and fixed cost data are as follows: Direct labor $100.00 Overhead Variable cost per unit $23.00 Fixed cost $100,000 Marketing general and administrative Variable cost per service contract completed) $24.00 Administrative expenses (fixed- per month $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 5 1662500 Cost of Goods Sold Beginning Inventory $ D Variable Costs 228000 Foxed Cost 42000 Less Ending Inventory Cost of Goods Sold 0 Type here to search O RI 403 9/16

Answer 1

a.

Absorption Costing Income Statement
Sales (9500 x $175)		1662500
Cost of goods sold:
Beginning inventory	0
Variable costs [10000 x ($100 + $23)]	1230000
Fixed cost	100000
Less: Ending inventory (500 x $133)	66500
Cost of goods sold		1263500
Gross profit		399000
Selling expense (9500 x $24)		228000
Administrative expense		42000
Net income		129000

Working:

Cost per unit:
Direct labor	100
Variable overhead	23
Fixed overhead ($100000/10000)	10
Cost per unit $	133

b.

Variable Costing Income Statement
Sales (9500 x $175)		1662500
Cost of goods sold:
Beginning inventory	0
Variable costs [10000 x ($100 + $23)]	1230000
Less: Ending inventory [500 x ($100 + $23)]	61500
Variable cost of goods sold		1168500
Variable selling expense (9500 x $24)		228000
Conribution margin		266000
Fixed costs:
Overhead cost	100000
Administrative expense	42000
Total fixed cost		142000
Net income		124000