Variable and Absorption Costing The following data were adapted from a recent income statement of Ansara Company for the year ended December 31: (in millions) Sales Cost of goods sold Selling, administrative, and other expenses Total expenses Operating income Assume that $4,550 million of cost of goods sold and $1,040 million of selling, administrative, and other expenses were fixed costs. Inventories at the beginning and end of the year were as follows: $20,700 $(17,600) (1,860) $(19,460) $1,240 Beginning inventory $2,480 Ending inve $2,900 Also, assume that 30% of the beginning and ending inventories were fixed costs. a. Prepare an income statement according to the variable costing concept for Ansara Company, Round numbers to nearest million. Ansara Company Variable Costing Income Statement (assumed) For the Year Ended December 31 Sales Variable cost of goods sold: Beginning inventory 207,000 a. Prepare an income statement according to the variable costing concept for Ansara Company. Round numbers to nearest million. Ansara Company Variable Costing Income Statement (assumed) For the Year Ended December 31 8 Sales Variable cost of goods sold: Beginning inventory Variable cost of goods manufactured Ending inventory Total variable cost of goods sold Variable selling and administrative expenses Contribution margin Fixed selling and administrative expenses Fixed costs: Variable cost of goods sold Variable selling and administrative expenses Total fixed costs Operating loss 207,000 b. Explain the difference between the amount of operating income reported under the absorption costing and variable costing concepts.
Variable and Absorption Costing The following data were adapted from a recent income statement of Ansara Company for the year ended December 31: (in millions) Sales Cost of goods sold Selling, administrative, and other expenses Total expenses Operating income Assume that $4,550 million of cost of goods sold and $1,040 million of selling, administrative, and other expenses were fixed costs. Inventories at the beginning and end of the year were as follows: $20,700 $(17,600) (1,860) $(19,460) $1,240 Beginning inventory $2,480 Ending inve $2,900 Also, assume that 30% of the beginning and ending inventories were fixed costs. a. Prepare an income statement according to the variable costing concept for Ansara Company, Round numbers to nearest million. Ansara Company Variable Costing Income Statement (assumed) For the Year Ended December 31 Sales Variable cost of goods sold: Beginning inventory 207,000 a. Prepare an income statement according to the variable costing concept for Ansara Company. Round numbers to nearest million. Ansara Company Variable Costing Income Statement (assumed) For the Year Ended December 31 8 Sales Variable cost of goods sold: Beginning inventory Variable cost of goods manufactured Ending inventory Total variable cost of goods sold Variable selling and administrative expenses Contribution margin Fixed selling and administrative expenses Fixed costs: Variable cost of goods sold Variable selling and administrative expenses Total fixed costs Operating loss 207,000 b. Explain the difference between the amount of operating income reported under the absorption costing and variable costing concepts.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Variable and Absorption Costing
The following data were adapted from a recent income statement of Ansara Company for the year ended December 31:
(in millions)
Sales
Cost of goods sold
Selling, administrative, and other expenses
Total expenses
Operating income
Assume that $4,550 million of cost of goods sold and $1,040 million of selling, administrative, and other expenses were fixed costs. Inventories at the
beginning and end of the year were as follows:
$20,700
$(17,600)
(1,860)
$(19,460)
$1,240
Beginning inventory
$2,480
Ending inve
$2,900
Also, assume that 30% of the beginning and ending inventories were fixed costs.
a. Prepare an income statement according to the variable costing concept for Ansara Company, Round numbers to nearest million.
Ansara Company
Variable Costing Income Statement (assumed)
For the Year Ended December 31
Sales
Variable cost of goods sold:
Beginning inventory
207,000
Transcribed Image Text:a. Prepare an income statement according to the variable costing concept for Ansara Company. Round numbers to nearest million.
Ansara Company
Variable Costing Income Statement (assumed)
For the Year Ended December 31
8
Sales
Variable cost of goods sold:
Beginning inventory
Variable cost of goods manufactured
Ending inventory
Total variable cost of goods sold
Variable selling and administrative expenses
Contribution margin
Fixed selling and administrative expenses
Fixed costs:
Variable cost of goods sold
Variable selling and administrative expenses
Total fixed costs
Operating loss
207,000
b. Explain the difference between the amount of operating income reported under the absorption costing and variable costing concepts.
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