Mario’s Foods produces frozen meals, which it sells for $8 each. The company uses the FIFO inventory costing method, and it computes a new monthly fixed manufacturing overhead rate based on the actual number of meals produced that month. All costs and production levels are exactly as planned. The following data are from the company’s first two months in business: (picture chart 1)Compute the product cost per meal produced under absorption costing and under variable costing. Do this first for January and then for February.Prepare separate monthly income statements for January and for February, using the following: a. Absorption costing b. Variable costing Is operating income higher under absorption costing or variable costing in January? In February? Explain the pattern of differences in operating income based on absorption costing versus variable costing. JanuaryFebruarySales ...1,400 meals1,800 mealsProduction...2,000 meals1,400 mealsVariable manufacturing expense per meal...2$4$4Sales commission expense per meal...$$2Total fixed manufacturing overhead..$ 700$ 700Total fixed marketing and administrative expenses..$ 500$ 500%24

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Description: Mario’s Foods produces frozen meals, which it sells for $8 each. The company uses the FIFO inventory costing method, and it computes a new monthly fixed manufacturing overhead rate based on the actual number of meals produced that month. All costs an

Under Absorption Costing Product cost per meal = Variable manufacturing expense per meal + Fixed…

Answered: Mario’s Foods produces frozen meals,…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Mario’s Foods produces frozen meals, which it sells for $8 each. The company uses the FIFO inventory costing method, and it computes a new monthly fixed manufacturing overhead rate based on the actual number of meals produced that month. All costs and production levels are exactly as planned. The following data are from the company’s first two months in business: (picture chart 1)

Compute the product cost per meal produced under absorption costing and under variable costing. Do this first for January and then for February.
Prepare separate monthly income statements for January and for February, using the following: a. Absorption costing b. Variable costing
Is operating income higher under absorption costing or variable costing in January? In February? Explain the pattern of differences in operating income based on absorption costing versus variable costing.

January
February
Sales ...
1,400 meals
1,800 meals
Production...
2,000 meals
1,400 meals
Variable manufacturing expense per meal...
2$
4
$
4
Sales commission expense per meal...
$
$
2
Total fixed manufacturing overhead..
$ 700
$ 700
Total fixed marketing and administrative expenses..
$ 500
$ 500
%24

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