Variable Costing for Management AnalysisWarren / Reeve / DuchacProblem 20-1A solution |
During the first month of operations ended May 31, 2010, Dorm Room Appliance Company manufactured 10,300 microwaves, of which 9,700 were sold. Operating data for the month are summarized as follows:
1. Prepare an income statement based on the absorption costing concept.
DORM ROOM APPLIANCE COMPANY
Absorption Costing Income Statement
For the Month Ended May 31, 2010
Sales $1,455,000
Cost of goods sold $1,144,600
Gross profit $310,400
Selling and administrative expenses $169,750
Income from operations $140,650
2. Prepare an income statement based on the variable costing concept.
DORM ROOM APPLIANCE COMPANY
Variable Costing Income Statement
For the Month Ended May 31, 2010
Sales $1,455,000
Variable cost of goods sold $1,057,300
Manufacturing margin $397,700
Variable selling and administrative expenses $116,400
Contribution margin $281,300
Fixed costs $146,050
Income from operations $135,250
