Income Statements under Absorption Costing and Variable Costing Fresno Industries Inc. manufactures and sells high-quality camping tents. The company began operations on January 1 and operated at 100% of capacity (68,200 units) during the first month, creating an ending inventory of 6,200 units. During February, the company produced 62,000 units during the month but sold 68,200 units at $75 per unit. The February manufacturing costs and selling and administrative expenses were as follows: Number of Units Unit Cost Total Cost Manufacturing costs in February 1 beginning inventory: Variable 6,200 $30.00 $186,000 Fixed 6,200 11.00 68,200 Total $41.00 $254,200 Manufacturing costs in February: Variable 62,000 $30.00 $1,860,000 Fixed 62,000 12.10 750,200 Total $42.10 $2,610,200 Selling and administrative expenses in February: Variable 68,200 $14.30 $975,260 Fixed 68,200 7.00 477,400 Total $21.30 $1,452,660 a. Prepare an income statement according to the absorption costing concept for the month ending February 28. Fresno Industries Inc. Absorption Costing Income Statement For the Month Ended February 28 Sales ? Cost of goods sold: Beginning inventory ? Cost of goods manufactured ? Total cost of goods sold ? Gross profit ? Selling and administrative expenses ? Operating income ? b. Prepare an income statement according to the variable costing concept for the month ending February 28. Fresno Industries Inc. Variable Costing Income Statement For the Month Ended February 28 Sales ? Variable cost of goods sold ? Manufacturing margin ? Variable selling and administrative expenses ? Contribution margin ? Fixed costs: Fixed manufacturing costs ? Fixed selling and administrative expenses ? Total fixed costs ? Operating income ?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Income Statements under Absorption Costing and Variable Costing

Fresno Industries Inc. manufactures and sells high-quality camping tents. The company began operations on January 1 and operated at 100% of capacity (68,200 units) during the first month, creating an ending inventory of 6,200 units. During February, the company produced 62,000 units during the month but sold 68,200 units at $75 per unit. The February manufacturing costs and selling and administrative expenses were as follows:

	Number of Units	Unit Cost	Total Cost
Manufacturing costs in February 1 beginning inventory:
Variable	6,200		$30.00		$186,000
Fixed	6,200		11.00		68,200
Total		$41.00		$254,200
Manufacturing costs in February:
Variable	62,000		$30.00		$1,860,000
Fixed	62,000		12.10		750,200
Total		$42.10		$2,610,200
Selling and administrative expenses in February:
Variable	68,200		$14.30		$975,260
Fixed	68,200		7.00		477,400
Total		$21.30		$1,452,660

a. Prepare an income statement according to the absorption costing concept for the month ending February 28.

Fresno Industries Inc.
Absorption Costing Income Statement
For the Month Ended February 28
Sales		?
Cost of goods sold:
Beginning inventory	?
Cost of goods manufactured	?
Total cost of goods sold		?
Gross profit		?
Selling and administrative expenses		?
Operating income		?

b. Prepare an income statement according to the variable costing concept for the month ending February 28.

Fresno Industries Inc.
Variable Costing Income Statement
For the Month Ended February 28
Sales		?
Variable cost of goods sold		?
Manufacturing margin		?
Variable selling and administrative expenses		?
Contribution margin		?
Fixed costs:
Fixed manufacturing costs	?
Fixed selling and administrative expenses	?
Total fixed costs		?
Operating income		?

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