Question Ansara Company had the following abbreviated income statement for the year ended December 31, 2016: Assume that there were $3, 860 million fixed manufacturing costs and $1, 170 million fixed selling, administrative, and other costs for the year. The finished goods inventories at the beginning and end of the year from the balance sheet were as follows: Assume that 30% of the beginning and ending inventory consists of fixed costs. Assume work in process and materials inventory were unchanged during the period. Prepare an income statement according to the variable costing concept for Ansara Company for 2016. Explain the difference between the amount of income from operations reported under the absorption costing and variable costing concepts.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Ansara Company had the following abbreviated income statement for the year ended December 31, 2016: Assume that there were $3, 860 million fixed manufacturing costs and $1, 170 million fixed selling, administrative, and other costs for the year. The finished goods inventories at the beginning and end of the year from the balance sheet were as follows: Assume that 30% of the beginning and ending inventory consists of fixed costs. Assume work in process and materials inventory were unchanged during the period. Prepare an income statement according to the variable costing concept for Ansara Company for 2016. Explain the difference between the amount of income from operations reported under the absorption costing and variable costing concepts.

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