Question

Income Statements under Absorption Costing and Variable Costing

Joplin Industries Inc. manufactures and sells high-quality sporting goods equipment under its highly recognizable J-Sports logo. The company began operations on May 1 and operated at 100% of capacity (59,400 units) during the first month, creating an ending inventory of 5,400 units. During June, the company produced 54,000 garments during the month but sold 59,400 units at $100 per unit. The June manufacturing costs and selling and administrative expenses were as follows:

	Number of Units		Unit Cost		Total Cost
Manufacturing costs in June 1 beginning inventory:
Variable	5,400		$40.00		$216,000
Fixed	5,400		15.00		81,000
Total			$55.00		$297,000
Manufacturing costs in June:
Variable	54,000		$40.00		$2,160,000
Fixed	54,000		16.50		891,000
Total			$56.50		$3,051,000
Selling and administrative expenses in June:
Variable	59,400		19.50		$1,158,300
Fixed	59,400		7.00		415,800
Total			26.50		$1,574,100

a. Prepare an income statement according to the absorption costing concept for June.

Joplin Industries Inc.
Absorption Costing Income Statement
For the Month Ended June 30
Sales		$
Cost of goods sold:
Beginning inventory	$
Cost of goods manufactured
Total cost of goods sold
Gross profit		$
Selling and administrative expenses
Income from operations		$

Feedback

a. Under absorption costing, the cost of goods manufactured includes direct materials, direct labor, and factory overhead costs. Both fixed and variable factory costs are included as part of factory overhead.

Learning Objective 1.

b. Prepare an income statement according to the variable costing concept for June.

Joplin Industries Inc.
Variable Costing Income Statement
For the Month Ended June 30
Sales		$
Variable cost of goods sold
Manufacturing margin		$
Variable selling and administrative expenses
Contribution margin		$
Fixed costs:
Fixed manufacturing costs	$
Fixed selling and administrative expenses
Total fixed costs
Income from operations		$

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and format. For detailed answer refer to the supporting sheet.