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Variable Costing Income Statement The following data were adapted from a recent

ID: 2484058 • Letter: V

Question

Variable Costing Income Statement

The following data were adapted from a recent income statement of Bluth Company:

Assume that the variable amount of each category of operating costs is as follows:

Based on the above data, prepare a variable costing income statement for Bluth Company, assuming that the company maintained constant inventory levels during the period.

Bluth Company

Variable Costing Income Statement

(in millions)

  

$  

  

  

  

$  

  

  

  

$  

Fixed costs:

  

$  

  

  

  

Income from operations

$  

(in millions) Net sales $168,720 Operating costs: Cost of products sold $80,990 Marketing, administrative, and other expenses 53,990 Total operating costs $134,980 Income from operations $33,740

Explanation / Answer

Solution:

Bluth Company

Variable Costing Income Statement

(in millions)

Net Sales

$168,720

Variable Costs:

Cost of products sold

$45,550

Marketing, administrative, and other expenses

$21,930

Total Variable Cost

$67,480

Contribution Margin

(Sales - Variable Cost)

$101,240

Fixed Costs:

Cost of products sold

$35,440

Marketing, administrative, and other expenses

$32,060

Total Fixed Costs

$67,500

Income from operations

(Contribution Margin - Total Fixed Costs)

$33,740

Note:

Fixed Cost = Total Cost - Variable Cost

Fixed Cost - Cost of products sold = $80,990 - $45,550 = $35,440

Fixed Cost - Marketing, administrative, and other expenses = $53,990 - 21,930 = $32,060

Bluth Company

Variable Costing Income Statement

(in millions)

Net Sales

$168,720

Variable Costs:

Cost of products sold

$45,550

Marketing, administrative, and other expenses

$21,930

Total Variable Cost

$67,480

Contribution Margin

(Sales - Variable Cost)

$101,240

Fixed Costs:

Cost of products sold

$35,440

Marketing, administrative, and other expenses

$32,060

Total Fixed Costs

$67,500

Income from operations

(Contribution Margin - Total Fixed Costs)

$33,740