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Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Requirement 3. Is operating income higher under absorption costing or variable costing in January?
In January, absorption costing operating income exceeds
variable costing operating income.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2731a74b-0add-4fc5-b627-4c578fe40a02%2F17ebb04a-f528-4ed4-b8b1-59d49c5919fd%2Flqx74ro_processed.png&w=3840&q=75)
Transcribed Image Text:Requirement 3. Is operating income higher under absorption costing or variable costing in January?
In January, absorption costing operating income exceeds
variable costing operating income.
![Maria's Foods produces frozen meals that it sells for $6 each. The company computes a new monthly fixed manufacturing overhead allocation rate based on the planned number of meals to be produced that month. Assume all costs and production levels are exactly as planned. The following data are from Maria's Foods's first
month in business:
E (Click the icon to view the data.)
Read the requirements
Requirement 1. Compute the product cost per meal produced under absorption costing and under variable costing. (Round your answers to the nearest cent.)
Absorption
costing
Variable
costing
- X
Total product cost per meal
2.35
2
Data Table
Requirement 2a. Prepare Maria's Foods's January income statement using absorption costing.
Maria's Foods
January 2018
Income Statement (Absorption Costing)
Units produced and sold:
Month Ended January 31, 2018
Sales
800 meals
Net Sales Revenue
4800
Production
1,100 meals
Cost of Goods Sold
1880
Variable manufacturing cost per meal
$
2
Gross Profit
2920
Sales commission cost per meal
Selling and Administrative Costs
1250
Total fixed manufacturing overhead
385
Operating Income
1670
Total fixed selling and administrative costs
450
Requirement 2b. Prepare Maria's Foods's January income statement using variable costing.
Print
Done
Maria's Foods
Income Statement (Variable Costing)
Month Ended January 31, 2018
Net Sales Revenue
4800
Variable Costs
2400
Contribution Margin
2400
Fixed Costs
835
Operating Income
1565](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2731a74b-0add-4fc5-b627-4c578fe40a02%2F17ebb04a-f528-4ed4-b8b1-59d49c5919fd%2Fcodmkc_processed.png&w=3840&q=75)
Transcribed Image Text:Maria's Foods produces frozen meals that it sells for $6 each. The company computes a new monthly fixed manufacturing overhead allocation rate based on the planned number of meals to be produced that month. Assume all costs and production levels are exactly as planned. The following data are from Maria's Foods's first
month in business:
E (Click the icon to view the data.)
Read the requirements
Requirement 1. Compute the product cost per meal produced under absorption costing and under variable costing. (Round your answers to the nearest cent.)
Absorption
costing
Variable
costing
- X
Total product cost per meal
2.35
2
Data Table
Requirement 2a. Prepare Maria's Foods's January income statement using absorption costing.
Maria's Foods
January 2018
Income Statement (Absorption Costing)
Units produced and sold:
Month Ended January 31, 2018
Sales
800 meals
Net Sales Revenue
4800
Production
1,100 meals
Cost of Goods Sold
1880
Variable manufacturing cost per meal
$
2
Gross Profit
2920
Sales commission cost per meal
Selling and Administrative Costs
1250
Total fixed manufacturing overhead
385
Operating Income
1670
Total fixed selling and administrative costs
450
Requirement 2b. Prepare Maria's Foods's January income statement using variable costing.
Print
Done
Maria's Foods
Income Statement (Variable Costing)
Month Ended January 31, 2018
Net Sales Revenue
4800
Variable Costs
2400
Contribution Margin
2400
Fixed Costs
835
Operating Income
1565
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