Variable Costing Income Statement The following data were adapted from a recent income statement of The Procter & Gamble Company (PG): (in millions) $181,390 Sales Operating costs: Cost of products sold Marketing, administrative, and other expenses Total operating costs $(87,070) (58,040) $(145,110) $36,280 Operating income Assume that the variable amount of each category of operating costs is as follows: (in millions) $48,980 23,580 Cost of products sold Marketing, administrative, and other expenses a. 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 Company Variable Costing Income Statement (assumed) (in millions) Line Item Description Amount Amount Fixed costs: $ b. 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 would fixed costs allocated to the beginning inventories. Thus, the total fixed costs of products sold on the

FINANCIAL ACCOUNTING
10th Edition
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Chapter1: Financial Statements And Business Decisions
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Variable Costing Income Statement
The following data were adapted from a recent income statement of The Procter & Gamble Company (PG):
(in millions)
$181,390
Sales
Operating costs:
Cost of products sold
Marketing, administrative, and other expenses
Total operating costs
$(87,070)
(58,040)
$(145,110)
$36,280
Operating income
Assume that the variable amount of each category of operating costs is as follows:
(in millions)
$48,980
23,580
Cost of products sold
Marketing, administrative, and other expenses
a. 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 Company
Variable Costing Income Statement
(assumed)
(in millions)
Line Item Description Amount Amount
Fixed costs:
| A
b. 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 would
fixed costs allocated to the beginning inventories. Thus, the total fixed costs of products sold on the
Transcribed Image Text:Variable Costing Income Statement The following data were adapted from a recent income statement of The Procter & Gamble Company (PG): (in millions) $181,390 Sales Operating costs: Cost of products sold Marketing, administrative, and other expenses Total operating costs $(87,070) (58,040) $(145,110) $36,280 Operating income Assume that the variable amount of each category of operating costs is as follows: (in millions) $48,980 23,580 Cost of products sold Marketing, administrative, and other expenses a. 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 Company Variable Costing Income Statement (assumed) (in millions) Line Item Description Amount Amount Fixed costs: | A b. 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 would fixed costs allocated to the beginning inventories. Thus, the total fixed costs of products sold on the
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