Question

Ansara Company had the following abbreviated income statement for the year ended December 31, 20Y2: (in millions) Sales $18,769 Cost of goods sold $15,471 Selling, administrative, and other expenses 2,049 Total expenses $17,520 Income from operations $1,249 Assume that there were $3,860 million fixed manufacturing costs and $1,170 million fixed selling, administrative, and other costs for the year. The finished goods inventories at the beginning and end of the year from the balance sheet were as follows: January 1 $2,354 million December 31 $2,408 million Assume that 30% of the beginning and ending inventory consists of fixed costs. Assume work in process and materials inventory were unchanged during the period. a. Prepare an income statement according to the variable costing concept for Ansara Company for 20Y2. Round to nearest million.

Answer 1

Ansara Company
Variable Costing Income Statement
Sales		$18,769.00
Less: Variable Cost of Goods Sold:
Beginning inventory (2354*70%)	$1,647.80
Variable cost of goods manufactured (calculated below)	$11,557.00
Cost of goods available for sale	$13,204.80
Less: Ending inventory (70% × $2,408)	($1,685.60)
Variable Cost of Goods Sold		$11,519.20
Manufacturing margin		$7,249.80
Less: Variable selling and administrative expenses(2049-1170)		$879.00
Contribution margin		$6,370.80
Less: Fixed Costs:
Fixed Manufacturing Costs	($3,860.00)
Fixed Selling & Administrative Expenses	($1,170.00)	($5,030.00)
Income from Operations		$1,340.80
Variable Cost of Goods Manufactured
Cost of Goods Sold	$15,471.00
Add: Beginning Inventory	$2,354.00
Less: Ending Inventory	($2,408.00)
Cost of goods manufactured	$15,417.00
Less: Fixed manufacturing costs	($3,860.00)
Variable cost of goods manufactured	$11,557.00