During the first month of operations ended August 31, Kodiak Fridgeration Compan
ID: 2543985 • Letter: D
Question
During the first month of operations ended August 31, Kodiak Fridgeration Company manufactured 80,000 mini refrigerators, of which 72,000 were sold. Operating data for the month are summarized as follows:
1
Sales
$10,800,000.00
2
Manufacturing costs:
3
Direct materials
$6,400,000.00
4
Direct labor
1,600,000.00
5
Variable manufacturing cost
1,280,000.00
6
Fixed manufacturing cost
320,000.00
9,600,000.00
7
Selling and administrative expenses:
8
Variable
$1,080,000.00
9
Fixed
180,000.00
1,260,000.00
Labels and Amount Descriptions
Absorption Costing Income Statement
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1. Prepare an income statement based on the absorption costing concept. 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 required. Enter Inventory, August 31 as a negative number using a minus sign. If a net loss is incurred, enter that amount as a negative number using a minus sign.
Score: 33/64
Kodiak Fridgeration Company
Absorption Costing Income Statement
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Points:
8.25 / 16
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Sales - (Cost of Goods Manufactured - Ending Inventory*) = Gross Profit; Gross Profit - Selling and Administrative Expenses = Income from Operations.
* (Manufactured Units - Sold Units) x (Total Manufacturing Costs/Manufactured Units)
Variable Costing Income Statement
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2. Prepare an income statement based on the variable costing concept. 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 required. Enter Inventory, August 31 as a negative number using a minus sign. If a net loss is incurred, enter that amount as a negative number using a minus sign.
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Score: 0/106
Kodiak Fridgeration Company
Variable Costing Income Statement
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Points:
0 / 25
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Sales - Variable Cost of Goods Sold* = Manufacturing Margin; Manufacturing Margin - Variable Selling and Administrative Expenses = Contribution Margin; Contribution Margin - (Fixed Manufacturing Costs + Fixed Selling and Administrative Expenses) = Income from Operations.
*Variable Cost of Goods Sold = Variable Cost of Goods Manufactured - [(Manufactured Units - Sold Units) x (Variable Manufacturing Costs/Manufactured Units)]
Final Question
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3. Explain the reason for the difference in the amount of income from operations reported in (1) and (2).
The income from operations reported under costing exceeds the income from operations reported under costing by the difference between the two, due to manufacturing costs that are deferred to a future month under costing.
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Recall that fixed factory overhead costs are considered a period expense under variable costing.
Please answer question by filling in the blanks. Thank you.
1
Sales
$10,800,000.00
2
Manufacturing costs:
3
Direct materials
$6,400,000.00
4
Direct labor
1,600,000.00
5
Variable manufacturing cost
1,280,000.00
6
Fixed manufacturing cost
320,000.00
9,600,000.00
7
Selling and administrative expenses:
8
Variable
$1,080,000.00
9
Fixed
180,000.00
1,260,000.00
Explanation / Answer
Absorption costing total manufacturing costs Direct materials 6,400,000 direct labor 1,600,000 Variable manufacturing cost 1,280,000 fixed manufacturing cost 320,000 total manufacturing costs 9,600,000 (cost of goods mfg-ending inventory*) *(manufactured units-sold units)*(total mfg cost/mfg units) *(80,000-72000)*(9,600,000/80,000) 960000 (cost of goods mfg-ending inventory*) (9,600,000-960,000) 8,640,000 Absorption costing income statement) Sales 10,800,000 less: Cost of goods manufactured 9,600,000 less ending inventory 960,000 8,640,000 Gross profit 2,160,000 less: Selling and adm expense 1,260,000 income from operations 900,000 Variable costing income statement sales 10,800,000 less variable cost of goods sold (DM+DL+VMOH) 8,352,000 Manufacturing margin 2,448,000 variable selling and administrative expense 1,080,000 Contribution margin 1,368,000 fixed costs: fixed manufacturing costs 320,000 fixed selling and administrative expens 180,000 500,000 income from operations 868,000 Variable cost of goods sold=variable cost of goods manufactured -(nfg units-sold units)* (variable mfg costs/mfg units) 9,280,000-(80000-72000)*(9280000/80000) 9280000-8000*116 8352000 total manufacturing costs Direct materials 6,400,000 direct labor 1,600,000 Variable manufacturing cost 1,280,000 total manufacturing costs 9,280,000
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