How do I prepare an income statement based on variable costing? Variable and Absorption CostingSummarized data for 2016 (the first year of operations) for Gorman Products, Inc., are as follows:Sales (75,000 units)$4,500,000Production costs (80,000 units)Direct material1,320,000Direct labor1,080,000Manufacturing overhead:Variable816,000Fixed480,000Operating expenses:Variable252,000Fixed360,000Depreciation on equipment90,000Real estate taxes27,000Personal property taxes (inventory & equipment)43,200Personnel department expenses45,000a. Prepare an income statement based on full absorption costing.Only use a negative sign with your answer for net income (loss), if the answer represents a net loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable.Absorption Costing Income StatementSales$ 4,500,000Cost of Goods Sold:Beginning InventoryDirect materials1,320,000Direct labor1,080,000Variable manufacturing overheadLess: Ending InventoryCost of Goods SoldGross profitOperating expensesNet Income (Loss)b. Prepare an income statement based on variable costing.Only use a negative sign with your answer for net income (loss), if the answer represents a net loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable.Variable Costing Income StatementSales$4Variable cost of Goods Sold:Beginning Inventory0.Direct materials%24

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ow do I prepare an income statement based on variable co

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Concept explainers

Manufacturing Costs

Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.

Question

How do I prepare an income statement based on variable costing?

Variable and Absorption Costing
Summarized data for 2016 (the first year of operations) for Gorman Products, Inc., are as follows:
Sales (75,000 units)
$4,500,000
Production costs (80,000 units)
Direct material
1,320,000
Direct labor
1,080,000
Manufacturing overhead:
Variable
816,000
Fixed
480,000
Operating expenses:
Variable
252,000
Fixed
360,000
Depreciation on equipment
90,000
Real estate taxes
27,000
Personal property taxes (inventory & equipment)
43,200
Personnel department expenses
45,000
a. Prepare an income statement based on full absorption costing.
Only use a negative sign with your answer for net income (loss), if the answer represents a net loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable.
Absorption Costing Income Statement
Sales
$ 4,500,000
Cost of Goods Sold:
Beginning Inventory
Direct materials
1,320,000
Direct labor
1,080,000
Variable manufacturing overhead
Less: Ending Inventory
Cost of Goods Sold
Gross profit
Operating expenses
Net Income (Loss)
b. Prepare an income statement based on variable costing.
Only use a negative sign with your answer for net income (loss), if the answer represents a net loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable.
Variable Costing Income Statement
Sales
$4
Variable cost of Goods Sold:
Beginning Inventory
0.
Direct materials
%24

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