Question

** how do I calculate the income from operations? I subtracted the sum of fixed manufacturing costs and fixed selling and administrative expenses from the contribution margin and got 15680 but my homework marks it as incorrect. ill put the problem below.

On October 31, the end of the first month of operations, Morristown & Co. prepared the following income statement based on absorption costing:

Morristown & Co.

Absorption Costing Income Statement

For Month Ended October 31, 20--

1	Sales (2,600 units)		$117,000.00
2	Cost of goods sold:
3	Cost of goods manufactured	$85,500.00
4	Less ending inventory (400 units)	11,400.00
5	Cost of goods sold		74,100.00
6	Gross profit		$42,900.00
7	Selling and administrative expenses		21,500.00
8	Income from operations		$21,400.00

If the fixed manufacturing costs were $42,900 and the variable selling and administrative expenses were $14,600, prepare an income statement using variable costing. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if it is required. If a net loss is incurred, enter that amount as a negative number using a minus sign.

Answer 1

Income statement under variable costing

Sales		117000
Less; Variable cost of goods sold
Variable cost of goods manufactured (85500-42900)	42600
Less: Ending inventory	-5680
Variable cost of goods sold		36920
Manufacturing margin		80080
Variable selling and administrative expense		14600
Contribution margin		65480
Fixed manufacturing cost	42900
Fixed selling and administrative expense	6900
Total fixed cost		49800
Income from operation		15680