Required a. Calculate reported income for management. b. Calculate reported income for the bank. c. Reconcile the two income amounts.
Required a. Calculate reported income for management. b. Calculate reported income for the bank. c. Reconcile the two income amounts.
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter3: Cost Behavior And Cost Forecasting
Section: Chapter Questions
Problem 54E: Income Statements under Absorption and Variable Costing In the coming year, Kalling Company expects...
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Question
E7-2A | Variable and Absorption Costing--Service Company | ||||||||||
Lawn RX, Inc. prepares a variable costing income statement for internal management and an absorption costing income statement for its bank. Lawn RX provides a quarterly lawn care service that is sold for $140. The variable and fixed cost data are as follows: | |||||||||||
Direct labor | $ 80 | ||||||||||
Overhead: | |||||||||||
Variable cost per unit | $ 5 | ||||||||||
Fixed cost | $ 100,000 | ||||||||||
Marketing, general, and administrative: | |||||||||||
Variable cost (per contract completed) | $ 6 | ||||||||||
Administrative expense (fixed) (per month) | $ 42,000 | ||||||||||
During 2019, 10,000 service contracts were signed and 9,800 service contracts were completed. Lawn RX had no service contracts at the beginning of the year. | |||||||||||
Required | |||||||||||
a. Calculate reported income for management. | |||||||||||
b. Calculate reported income for the bank. | |||||||||||
c. Reconcile the two income amounts. |
|
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