Question

Absorption and Variable Costing Income Statements

During the first month of operations ended July 31, YoSan Inc. manufactured 9,200 flat panel televisions, of which 8,600 were sold. Operating data for the month are summarized as follows:

Sales		$1,505,000
Manufacturing costs:
Direct materials	$754,400
Direct labor	230,000
Variable manufacturing cost	193,200
Fixed manufacturing cost	101,200	1,278,800
Selling and administrative expenses:
Variable	$120,400
Fixed	55,400	175,800

Required:

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

YoSan Inc.
Absorption Costing Income Statement
For the Month Ended July 31
		$fill in the blank a89d36fd7f84fe8_2
Cost of goods sold:
	$fill in the blank a89d36fd7f84fe8_4
	fill in the blank a89d36fd7f84fe8_6
		fill in the blank a89d36fd7f84fe8_8
		$fill in the blank a89d36fd7f84fe8_10
		fill in the blank a89d36fd7f84fe8_12
		$fill in the blank a89d36fd7f84fe8_14

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

YoSan Inc.
Variable Costing Income Statement
For the Month Ended July 31
		$fill in the blank ea3211015070002_2
Variable cost of goods sold:
	$fill in the blank ea3211015070002_4
	fill in the blank ea3211015070002_6
		fill in the blank ea3211015070002_8
		$fill in the blank ea3211015070002_10
		fill in the blank ea3211015070002_12
		$fill in the blank ea3211015070002_14
Fixed costs:
	$fill in the blank ea3211015070002_16
	fill in the blank ea3211015070002_18
		fill in the blank ea3211015070002_20
		$fill in the blank ea3211015070002_22

3. Explain the reason for the difference in the amount of operating income reported in (1) and (2).

The operating income reported under   costing exceeds the operating income reported under   costing, due to   manufacturing costs that are deferred to a future month under   costing.

Answer 1

1.

2.

3

The difference is the fixed cost attached to the ending inventory.