Variable Costing Income StatementThe following data were adapted from a recent income statement of The Procter & Gamble Company (PG):(in millions)$181,390SalesOperating costs:Cost of products soldMarketing, administrative, and other expensesTotal operating costs$(87,070)(58,040)$(145,110)$36,280Operating incomeAssume that the variable amount of each category of operating costs is as follows:(in millions)$48,98023,580Cost of products soldMarketing, administrative, and other expensesa. Based on the data given, prepare a variable costing income statement for Procter & Gamble, assuming that the company maintained constant inventory levels during the period.The Procter & Gamble CompanyVariable Costing Income Statement(assumed)(in millions)Line Item Description Amount AmountFixed costs:| Ab. If Procter & Gamble reduced its inventories during the period, what impact would that have on the operating income determined under absorption costing?If Procter & Gamble reduced its inventories during the period, then the cost of products sold wouldfixed costs allocated to the beginning inventories. Thus, the total fixed costs of products sold on the

Income statement is a financial statement that shows profitability, total revenue and total…

Answered: Variable Costing Income Statement The…

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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Prepare the income statement for the year ended 31 December 2020 using: Absorption costing Variable costing
Brand Company provides the following information about its single product. Targeted operating income $35,000 Selling price per unit $7.85 Variable cost per unit $6.10 Total fixed cost $96,250 What is the contribution margin per unit at the Brand Company? A) $6.10 B) $1.75 C) $0.22 D) $13.95
Absorption Statement Absorption costing does not distinguish between variable and fixed costs. All manufacturing costs are included in the cost of goods sold. Saxon, Inc.Absorption Costing Income StatementFor the Year Ended December 31 Sales $1,200,000 Cost of goods sold: Cost of goods manufactured $800,000 Ending inventory (200,000) Total cost of goods sold (600,000) Gross profit $600,000 Selling and administrative expenses (260,000) Operating income $340,000 Variable Statement Under variable costing, the cost of goods manufactured includes only variable manufacturing costs. This type of income statement includes a computation of manufacturing margin. Saxon, Inc.Variable Costing Income StatementFor the Year Ended December 31 Sales $1,200,000 Variable cost of goods sold: Variable cost of goods manufactured $560,000 Ending inventory (140,000) Total variable cost of goods sold (420,000) Manufacturing…
During Heaton Company's first two years of operations, It reported absorption costing net operating income as follows: Sales (e $63 per unit) Cost of goods sold (e $37 per unit) Gross margin Selling and administrative expenses Net operating income Year 1 $ 1,071,000 629,000 442,000 298,000 $ 144,000 Year 2 $ 1,701,000 999,000 702,000 328,000 $ 374,000 $3 per unit variable; $247,000 fixed each year. The company's $37 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($374,000 + 22,000 units) Absorption costing unit product cost $ 5 10 17 $ 37 Production and cost data for the first two years of operations are: Year 1 22,000 17,000 Year 2 Units produced Units sold 22,000 27,000 Required: 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3. Reconcile the absorption costing and the variable costing net…
Jackson Manufacturing, Inc., makes two types of industrial component parts—the XT-100 and the LT-200. An absorption costing income statement for the most recent period is shown: Jackson Manufacturing Inc. Income Statement Sales $2,100,000 Cost of goods sold 1,600,000 Gross margin 500,000 Selling and administrative expenses 550,000 Net operating loss $ (50,000) Table Summary: Income statement with two-line heading. Descriptions of income items are in first column and dollar values in second column. Jackson produced and sold 70,000 units of XT-100 at a price of $20 per unit and 17,500 units of LT-200 at a price of $40 per unit. The company’s traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below:XT-100 LT-200 Total Direct materials $436,300 $251,700 $ 688,000 Direct labor $200,000 $104,000 304,000 Manufacturing…
Variable Costing Income Statement The following data were adapted from a recent income statement of The Bluth Company: Sales Operating costs: Cost of products sold Marketing, administrative, and other expenses Total operating costs Operating income Cost of products sold Marketing, administrative, and other expenses The Bluth Company Variable Costing Income Assume that the variable amount of each category of operating costs is as follows: Statement (assumed) (in millions) (in millions) $162,030 Fixed costs: $(77,770) (51,850) a. Based on the data given, prepare a variable costing income statement for Bluth, assuming that the company maintained constant inventory levels during the period. $(129,620) $32,410 would be (in millions) $43,750 21,060 b. If the Bluth company reduced its inventories during the period, what impact would that have on the operating income determined under absorption costing? If the Bluth company reduced its inventories during the period, then the cost of products…
Tucker Company reports the following data: Sales $415,400 Variable costs 278,300 Contribution margin $137,100 Fixed costs 112,200 Income from operations $24,900 Determine Tucker Company's operating leverage. Round your answer to one decimal place.fill in the blank 1
Original costs Proportion of Administrative hours used Proportion of Information Systems hours used Proportion of Maintenance hours used (a) Total costs Administrative Institutional $77,000 0.20 Operating Segments 0.10 Support Departments Information Systems Maintenance $110,600 $62,000 0.10 Retail 0.10 0.10 0.10 Operating Segments Institutional Retail $649,000 $351,000 0.45 0.40 Determine the total costs that each operating segment would be accountable for if support costs are allocated using the direct method. (Round interme 0.30 0.35 0.30 0.50
The single-column CVP income statements shown below are available for Wildhorse Company and Blossom Company, Sales Variable costs Contribution margin Fixed costs Net income Wildhorse Wildhorse Co. Blossom $495,000 239,000 256,000 1000 156,000 $100,000 Blossom Co. Degree of Operating Leverage $495,000 (a1) Compute the degree of operating leverage for each company. (Round answers to 2 decimal places, e.g. 1.15.) $ 51,000 444,000 344,000 $100,000 (b) Assuming that sales revenue increases by 10% (due to a 10% increase in the number of units sold), prepare a single-plumn CVP income statement for each company. Wildhorse Company $ tA $ Blossom Company
Franklin Modems, Inc. makes modem cards that are used In notebook computers. The company completed the following transactions during year 1. All purchases and sales were made with cash. 1. Acquired $820,000 of cash from the owners. 2. Purchased $305,900 of manufacturing equipment. The equipment has a $37,000 salvage value and a four-year useful life. 3. The company started and completed 5,700 modems. Direct materials purchased and used amounted to $47 per unit. 4. Direct labor costs amounted to $32 per unit. 5. The cost of manufacturing supplies used amounted to $11 per unit. 6. The company paid $57,800 to rent the manufacturing facility. 7. Franklin sold all 5,70e units at a cash price of $155 per unit. 8. The sales staff was paid a $9.50 per unit sales commission. 9. Paid $46,eee to purchase equipment for administrative offices. The equipment was expected to have a $3,700 salvage value and a three-year useful life. 10. Administrative expenses consisting of office rental and salaries…
On November 30, the end of the first month of operations, Weatherford Company prepared the following income statement, based on the absorption costing concept: Weatherford Company Absorption Costing Income Statement For the Month Ended November 30 Sales (6,100 units) Cost of goods sold: Cost of goods manufactured (7,000 units) Inventory, November 30 (1,000 units) Total cost of goods sold Gross profit $161,000 Sales Variable cost of goods sold: Variable cost of goods manufactured Inventory, November 30 (23,000) $201,300 138,000 $63,300 Selling and administrative expenses 35,910 Income from operations $27,390 Assume the fixed manufacturing costs were $38,640 and the fixed selling and administrative expenses were $17,590 Prepare an income statement according to the variable costing concept. Round all final answers to whole dollars. Weatherford Company Variable Costing Income Statement For the Month Ended November 30 201,300
Variable Costing Income Statement On April 30, the end of the first month of operations, Joplin Company prepared the following income statement, based on the absorption costing concept: Joplin Company Absorption Costing Income Statement For the Month Ended April 30 Sales (5,600 units) Cost of goods sold: Cost of goods manufactured (6,600 units) Inventory, April 30 (900 units) Total cost of goods sold Gross profit Selling and administrative expenses Operating income Variable cost of goods sold: $138,600 (18,900) Fixed costs: $162,400 If the fixed manufacturing costs were $30,492 and the fixed selling and administrative expenses were $12,600, prepare an income statement according to the variable costing concept. Round all final answers to whole dollars. Joplin Company Variable Costing Income Statement For the Month Ended April 30 (119,700) $42,700 (25,720) $16,980

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