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 (in millions) $162,030 Cost of products sold Marketing, administrative, and other expenses $(77,770) (51,850) $(129,620) $32,410 Assume that the variable amount of each category of operating costs is as follows: (in millions) $43,750 21,060 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.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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**Variable Costing Income Statement**

The following data were adapted from a recent income statement of The Bluth Company:

---

**(in millions)**

- **Sales**: $162,030

**Operating costs:**

- **Cost of products sold**: $(77,770)
- **Marketing, administrative, and other expenses**: $(51,850)

**Total operating costs**: $(129,620)

**Operating income**: $32,410

---

Assume that the variable amount of each category of operating costs is as follows:

**(in millions)**

- **Cost of products sold**: $43,750
- **Marketing, administrative, and other expenses**: $21,060

---

**Tasks:**

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.**

The Bluth Company
Variable Costing Income Statement (assumed)
(in millions)

---

[Blank Income Statement Template with Dollar Amount Fields for Input]

- Fixed costs:

---

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 sold would [dropdown] fixed costs allocated to the beginning inventories. Thus, the total fixed costs of products sold on the absorption costing income statement would be [dropdown], and the operating income would be [dropdown].
Transcribed Image Text:**Variable Costing Income Statement** The following data were adapted from a recent income statement of The Bluth Company: --- **(in millions)** - **Sales**: $162,030 **Operating costs:** - **Cost of products sold**: $(77,770) - **Marketing, administrative, and other expenses**: $(51,850) **Total operating costs**: $(129,620) **Operating income**: $32,410 --- Assume that the variable amount of each category of operating costs is as follows: **(in millions)** - **Cost of products sold**: $43,750 - **Marketing, administrative, and other expenses**: $21,060 --- **Tasks:** 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.** The Bluth Company Variable Costing Income Statement (assumed) (in millions) --- [Blank Income Statement Template with Dollar Amount Fields for Input] - Fixed costs: --- 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 sold would [dropdown] fixed costs allocated to the beginning inventories. Thus, the total fixed costs of products sold on the absorption costing income statement would be [dropdown], and the operating income would be [dropdown].
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