Question

Homework: Wek # 7 Chapter #13 Homework Save Score: 0 of 5 pts 23 of 25 (22 complete) HW Score: 63.78 % , 26.79 of 42 pts FAM13-A4 (similar to) Question Help ne Examine the Trahn Company's simplfied income statement based on variable costing. Assume that the budgeted volume for absorption costing in 20X0 and 20X1 was 1.340 units and that total fixed costs were identical in 20XO and 20X1. There is no beginning or ending work in process EEB (Cick the icon to view the simplified income statement) yo Requirements 1. Prepare an income statement based on absorption costing Assume that actual fixed costs were equal to budgeted fixed costs 2.Explain the difference in operating income between absorption costing and variable costing. Be specific. Requirement 1. Prepare an income statement based on absorption costing Assume that actual fixed costs were equal to budgeted fixed costs ed Trahn Company Absorption Costing Income Statement cor For the Year Ended December 31, 20X1 Sales 15000 ist Beginning inventory 1272 Cost of goods manufactured, at standard 12614 Cost of goods available for sale 13886 Ending inventory 636 Cost of goods sold, at standard b 13250 Gross profit, at standard 1750 Production-volume variance h 540 Gross profit, at "actual 1210 Selling and administrative expenses Operating income Choose from any list or enter any number in the input fields and then click Check Answer 1 part remaining Clear All Check Answer

Answer 1

		Unit product cost
	PART A	Particulars	Amount
		1.vaiable cost	7
		2.Fixed over head rate	3.6
		(4824/1340)
		3.Unit product cost	10.6
		Income statement as per absorption costing
		Particulars	Amount	Amount
		Sales		15000
		Less: Cost of goods sold
		Opening stock (120*10.6)	1272
		Add:absorption cost of goods manufactured(1190*10.6)	12614
		Cost of production	13886
		Less:Closing stock(60*10.6)	636
		Cost of goods sold t budgeted base	13250
		underapplied fixed overhead	540
		Adjusted cost of goods sold		13790
		Contribution		1210
		Less: selling and distribution expenses(800+250)		1050
		Operating income		160
		Underapplied fixed overhead
		unit production budgeted	1340
		unit produced in actual	1190
		variance in production	150
		Underapplied fixed overhead(150*3.6)	540
		Hence operating income as per absorption costing is 150
	PART B	Difference in operating income in absorption and Variable costing
		Particulars	Amount
		opening stock	120
		Closing stock	60
		Difference	60
		Fixed overhead rate	3.6
		difference in operating income	216
		hence 216 lesser than variable costing income
		corss check 216+160=376
		i.e profit under absorption + difference =profit under variable