Obj. 1 EX 20-3 Income statements under absorption costing and variable costing Joplin Industries Inc. manufactures and sells high-quality sporting goods equipment under its highly recognizable J-Sports logo. The company began operations on May 1 and operated at 100% of capacity (270,000 units) during the first month, creating an ending inventory of 24,000 units. During June, the company produced 246,000 garments during the month but sold 270,000 units at $300 per unit. The June manufacturing costs and selling and administrative expenses were as follows: Number of Units Unit Cost Total Cost Manufacturing costs in June 1 beginning inventory: Variable. 24,000 $150.00 $ 3,600,000 Fixed 24,000 32.80 787,200 Total $182.80 $ 4,387,200 Manufacturing costs in June: Variable. 246,000 $150.00 $36,900,000 Fixed 246,000 36.00 8,856,000 Total $186.00 $45,756,000 Selling and administrative expenses in June: Variable 270,000 $ 45.00 $12,150,000 Fixed 270,000 3.60 972,000 Total $ 48.60 $13,122,000 A. Prepare an income statement according to the absorption costing concept for June. B. Prepare an income statement according to the variable costing concept for June. С. What is the reason for the difference in the amount of income from operations reported in (A) and (B)?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Transcribed Image Text:# Income Statements Under Absorption Costing and Variable Costing ## Overview Joplin Industries Inc. manufactures high-quality sporting goods under its J-Sports logo. Operations began on May 1, running at full capacity (270,000 units) in the first month, with an ending inventory of 24,000 units. In June, the company produced 246,000 garments but sold 270,000 units at $300 each. Below is a breakdown of June's manufacturing costs and selling and administrative expenses. ## Manufacturing Costs and Expenses ### June 1 Beginning Inventory: - **Variable Costs:** - Units: 24,000 - Unit Cost: $150.00 - Total Cost: $3,600,000 - **Fixed Costs:** - Units: 24,000 - Unit Cost: $32.80 - Total Cost: $787,200 - **Total:** - Unit Cost: $182.80 - Total Cost: $4,387,200 ### Manufacturing Costs in June: - **Variable Costs:** - Units: 246,000 - Unit Cost: $150.00 - Total Cost: $36,900,000 - **Fixed Costs:** - Units: 246,000 - Unit Cost: $36.00 - Total Cost: $8,856,000 - **Total:** - Unit Cost: $186.00 - Total Cost: $45,756,000 ### Selling and Administrative Expenses in June: - **Variable Costs:** - Units: 270,000 - Unit Cost: $45.00 - Total Cost: $12,150,000 - **Fixed Costs:** - Units: 270,000 - Unit Cost: $3.60 - Total Cost: $972,000 - **Total:** - Unit Cost: $48.60 - Total Cost: $13,122,000 ## Tasks A. **Prepare an Income Statement Using Absorption Costing for June.** B. **Prepare an Income Statement Using Variable Costing for June.** C. **What Causes the Difference in Operating Income Between (A) and (B)?** This exercise highlights the impact of costing methods on financial reporting, with a focus on

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