Question

given below is the variable costing income statement for a XY Company:

                       

Sales, 6,000 units @ $35                                                         $210,000

Variable costs:

Beginning inventory, 680 units @ $20               $13,600

Variable manufacturing cost of

goods manufactured, 6,600 units @ $20       + $132,000

Ending inventory, 1,280 units @ $20               - $25,600

Variable manufacturing cost of goods              $120,000

Variable selling and administrative exp.           + $24,900

Total variable costs                                                       - $144,900

Contribution margin                                                                 $65,100

Fixed costs:

Fixed factory overhead                                     $19,800

Fixed selling and admin. expenses                 + $15,300

Total fixed costs                                                               - $35,100

Operating income                                                                     $30,000

REQUIRED:                                                                            

   a. Prepare an absorption-costing income statement for the same period.

   b. Reconcile the difference between variable costing and absorption costing operating income.

Note: Please Show all the steps and calculations in solving the problem ( I don't need the problem on excel i need to see all the steps)

Answer 1

Ans.   Income statement as absorption-costing income statement

Sales (6000X35)                          =      210000

Less: Cost of goods sold

Opening stock (680X23)    = 15640           

Add:cost of manufacturing                         

(6600X23) = 151800       

Less:Clo stock(1280X23)   = (29440)   

cost of goods sold                              = 138000

Gross profit (210000-138000)       =    72000

Less: Market and admn exp.

Variable marketable exp. =   24900     

Fixed marketable exp.                         = 15300

Net operating Income                           =    31800

*Calculation of Total goods production during the year

= Sale inventory+closing inventory-opening inventory

=6000+1280-680 = 6600 units or we can directory good manufactured during the year 6600 units

** Calculation of manfacturing expenses per unit = 20+(19800/6600) = 23 per unit

b. Reconcile Statement between variable costing and absorption costing operating income

Operating Income as per Variable costing              =       30000

Add: Fixed cost included in closing stock (1280X3) =      3840

Less: Fixed cost included in opening stock (680X3) =     2040

Operating income as per absorption costing            =     31800