Variable Costing Income Statement The following data were adapted from a recent income statement of The Procter & Gamble Company (PG): (in millions) Sales $65,058 Operating costs: Cost of products sold $(32,535) Marketing, administrative, and other expenses (18,568) $(51,103) Total operating costs $13,955 Operating income Assume that the variable amount of each category of operating costs is as follows: (in millions) Cost of products sold $19,500 Marketing, administrative, and other expenses 14,000 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) The Procter & Gamble Company Variable Costing Income Statement (assumed) (in millions) 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 Company 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 absorption costing income statement would be and the operating income would be
Variable Costing Income Statement The following data were adapted from a recent income statement of The Procter & Gamble Company (PG): (in millions) Sales $65,058 Operating costs: Cost of products sold $(32,535) Marketing, administrative, and other expenses (18,568) $(51,103) Total operating costs $13,955 Operating income Assume that the variable amount of each category of operating costs is as follows: (in millions) Cost of products sold $19,500 Marketing, administrative, and other expenses 14,000 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) The Procter & Gamble Company Variable Costing Income Statement (assumed) (in millions) 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 Company 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 absorption costing income statement would be and the operating income would be
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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)
Sales
$65,058
Operating costs:
Cost of products sold
$(32,535)
Marketing, administrative, and other expenses
(18,568)
$(51,103)
Total operating costs
$13,955
Operating income
Assume that the variable amount of each category of operating costs is as follows:
(in millions)
Cost of products sold
$19,500
Marketing, administrative, and other expenses
14,000
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)
Transcribed Image Text:The Procter & Gamble Company
Variable Costing Income Statement (assumed)
(in millions)
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 Company 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 absorption costing income statement would be
and the operating income would be
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