During the first month of operations ended August 31, Kodiak Fridgeration Company manufactured 40,000 mini refrigerators, of which 36,000 were sold. Operating data for the month are summarized as follows: 1 Sales $8,280,000.00 2 Manufacturing costs: 3 Direct materials $2,800,000.00 4 Direct labor 1,200,000.00 5 Variable manufacturing cost 800,000.00 6 Fixed manufacturing cost 440,000.00 5,240,000.00 7 Selling and administrative expenses: 8 Variable $540,000.00 9 Fixed 216,000.00 756,000.00 Required: 1. Prepare an income statement based on the absorption costing concept.* 2. Prepare an income statement based on the variable costing concept.* 3. Explain the reason for the difference in the amount of income from operations reported in (1) and (2). * Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if required. Enter Inventory, August 31 as a negative number using a minus sign. If a net loss is incurred, enter that amount as a negative number using a minus sign.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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1
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Sales
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$8,280,000.00
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2
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3
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Direct materials
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$2,800,000.00
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4
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Direct labor
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1,200,000.00
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5
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Variable manufacturing cost
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800,000.00
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6
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Fixed manufacturing cost
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440,000.00
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5,240,000.00
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7
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Selling and administrative expenses:
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8
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Variable
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$540,000.00
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9
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Fixed
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216,000.00
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756,000.00
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| Required: | |||
| 1. | Prepare an income statement based on the absorption costing concept.* | ||
| 2. | Prepare an income statement based on the variable costing concept.* | ||
| 3. | Explain the reason for the difference in the amount of income from operations reported in (1) and (2).
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