Absorption and Variable Costing Income Statements During the first month of oper

Question

Absorption and Variable Costing Income Statements

During the first month of operations ended May 31, 2014, Dorm Fridge Company manufactured 9,400 microwaves, of which 8,900 were sold. Operating data for the month are summarized as follows:

129,900

1. Prepare an income statement based on the absorption costing concept.

2. Prepare an income statement based on the variable costing concept.

Sales $1,157,000 Manufacturing costs:     Direct materials $573,400     Direct labor 169,200     Variable manufacturing cost 150,400     Fixed manufacturing cost 75,200 968,200 Selling and administrative expenses:     Variable $89,000     Fixed 40,900

129,900

Dorm Fridge Company Absorption Costing Income Statement For the Month Ended May 31, 2014 Sales Cost of goods sold: Cost of goods manufactured Less inventory, May 31 Cost of goods sold Gross profit Selling and administrative exp Income from operations

Explanation / Answer

Absorption Costing and Variable Costing Income statement is prepared as under:

Dorm Fridge Company Absorption Costing Income Statement For the month Ended May 31, 2014 Particulars Amount ($) Amount ($) Sales 1,157,000 Cost of goods sold:    Cost of goods manufactured 968,200    Less: Inventory, may 31 51,500 Cost of goods sold: 916,700 Gross Profit 240,300 Selling and administrative expenses 129,900 Income from operations 110,400

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