Question

Lawn RX, Inc. prepares a variable costing income statement for internal management and an absorption costing income statement for its bank. Lawn RX provides a quarterly lawn care service that is sold for $160. The variable and fixed cost data are as follows:

Direct labor				$100.00
Overhead
Variable cost per unit				$10.00
Fixed cost				$100,000
Marketing, general and administrative
Variable cost (per service contract completed)				$11.00
Administrative expenses (fixed - per month)				$42,000

During 2016, 10,000 service contracts were signed and 9,500 service contracts were completed. Lawn RX had no service contracts at the beginning of the year.

a. Calculate reported income for management.
Do not use negative signs with any answers.

Absorption Costing Income Statement
Sales				$Answer
Cost of Goods Sold:
Beginning Inventory			$Answer
Variable Costs			Answer
Fixed Cost			Answer
Less: Ending Inventory			Answer
Cost of Goods Sold				Answer
AnswerContribution marginGross profitLess: Ending inventorySelling expenseOverhead cost				Answer
AnswerContribution marginGross profitLess: Ending inventorySelling expenseOverhead cost				Answer
Administrative expense				Answer
Net Income				$Answer

b. Calculate reported income for the bank.
Do not use negative signs with any answers.

Variable Costing Income Statement
Sales				$Answer
Cost of Goods Sold:
Beginning Inventory			$Answer
Variable Costs			Answer
AnswerContribution marginGross profitLess: Ending inventoryOverhead costVariable selling expense			Answer
Variable cost of goods sold				Answer
AnswerContribution marginGross profitLess: Ending inventoryOverhead costVariable selling expense				Answer
AnswerContribution marginGross profitLess: Ending inventoryOverhead costVariable selling expense				Answer
Fixed costs:
AnswerContribution marginGross profitLess: Ending inventoryOverhead costVariable selling expense			Answer
Administrative Expense			Answer
Total Fixed Cost				Answer
Net Income				$Answer

Answer 1