Required: 1a. Prepare an income statement for January using the absorption costi
ID: 2418063 • Letter: R
Question
Required:
1a. Prepare an income statement for January using the absorption costing concept. Enter all amounts as positive numbers.
Hip and Conscious Clothing Company
Absorption Costing Income Statement
For the Month Ended January 31, 2015
$
Cost of goods sold:
$
$
$
1b. Prepare an income statement for February using the absorption costing concept. Enter all amounts as positive numbers.
Hip and Conscious Clothing Company
Absorption Costing Income Statement
For the Month Ended February 28, 2015
$
Cost of goods sold:
$
$
$
2a. Prepare an income statement for January using the variable costing concept. Enter all amounts as positive numbers.
Hip and Conscious Clothing Company
Variable Costing Income Statement
For the Month Ended January 31, 2015
$
Variable cost of goods sold:
$
$
$
Fixed costs:
$
$
2b. Prepare an income statement for February using the variable costing concept. Enter all amounts as positive numbers.
Hip and Conscious Clothing Company
Variable Costing Income Statement
For the Month Ended February 28, 2015
$
Variable cost of goods sold:
$
$
$
Fixed costs:
$
$
3a. For January, income from operations reported under SelectabsorptionvariableCorrect 1 of Item 5 costing is less than SelectabsorptionvariableCorrect 2 of Item 5 costing due to part of SelectfixedvariableCorrect 3 of Item 5manufacturing costs that are expensed.
3b. When large changes in inventory levels occur from one period to the next, it is possible for management to misinterpret such increases (or decreases) in income from operations as due to changes in:
costs.
prices.
sales volume.
"sales volume", "prices" and "costs" are correct.
None of these choices is correct.
The correct answer is:
SelectabcdeCorrect 4 of Item 5
1a. Prepare an income statement for January using the absorption costing concept. Enter all amounts as positive numbers.
Hip and Conscious Clothing Company
Absorption Costing Income Statement
For the Month Ended January 31, 2015
$
Cost of goods sold:
$
$
$
Explanation / Answer
Hip & conscious Unit Calculation Month Jan Feb Opening bal - 4,050.00 Produced units 55,500.00 47,400.00 Units sold 51,450.00 51,450.00 Closing balance 4,050.00 - Unit Cost of productionn Abs costing 12.90 13.07 Unit Cost of productionn variable costing 11.90 11.90 Unit cost of selling & admin 0.70 0.70 Hip & conscious Absorption Costing Income Statement Months Jan Feb Sales Revenue 771,750.00 771,750.00 Less : Cost of goods sold Opening Stock - 52,245.00 Cost of production 715,950.00 619,560.00 Less : Closing stock (52,245.00) - Cost of Goods sold 663,705.00 671,805.00 Gross Profit 108,045.00 99,945.00 Selling & Admin cost 61,740.00 61,740.00 Net Operating Income 46,305.00 38,205.00 Hip & conscious Variable Costing Income Statement Months Jan Feb Sales Revenue 771,750.00 771,750.00 Less : Variable Cost of goods sold Opening Stock - 48,195.00 Cost of production 660,450.00 564,060.00 Less : Closing stock (48,195.00) - Cost of Goods sold 612,255.00 612,255.00 Variable cost of selling & Admin 36,015.00 36,015.00 Variable cost of sales 648,270.00 648,270.00 Contribution Margin 123,480.00 123,480.00 Fixed costs Fixed Manufacturing OH 55,500.00 55,500.00 Fixed selling & Admin OH 25,725.00 25,725.00 Total Fixed cost 81,225.00 81,225.00 Net Operating Income 42,255.00 42,255.00 3a For Jan the income from operations in variable costing is less than absorption costing due to fixed item of manufacturing cost that are expensed
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