Answered: Absorption and Variable Costing Income…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Line Item Description	Amount	Amount
Sales		$2,150,000
Manufacturing costs:
Direct materials	$960,000
Direct labor	420,000
Variable manufacturing cost	156,000
Fixed manufacturing cost	288,000	1,824,000
Selling and administrative expenses:
Variable	$204,000
Fixed	96,000	300,000

Question Content Area

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

YoSan Inc.Absorption Costing Income StatementFor the Month Ended July 31

Line Item Description	Amount		Amount
			-
Cost of goods sold:





			$- Select -

Question Content Area

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

YoSan Inc.Variable Costing Income StatementFor the Month Ended July 31

Line Item Description	Amount	Amount

Variable cost of goods sold:






Fixed costs:

Question Content Area

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.

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