Question

On April 30, the end of the first month of operations, Joplin Company prepared the following income statement, based on the absorption costing concept: Joplin Company Absorption Costing Income Statement For the Month Ended April 30 Sales (5,600 units) $145,600 Cost of goods sold: Cost of goods manufactured (6,400 units) $115,200 Inventory, April 30 (900 units) (16,200) Total cost of goods sold (99,000) Gross profit $46,600 Selling and administrative expenses (24,740) Operating income $21,860 If the fixed manufacturing costs were $23,040 and the fixed selling and administrative expenses were $12,120, prepare an income statement according to the variable costing concept. Round all final answers to whole dollars.

Answer 1

See below

Step-by-step explanation:

Preparation of variable costing income statement

Sales $145,600

Variable cost of goods sold

$92,160

Less:

Inventory, April 30

($12,960)

Total variable cost of goods sold

$79,200

Manufacturing margin

$66,400

Variable selling and administrative expenses ($12,620)

Contribution margin $66,580

Less:

Fixed costs $23,040

Fixed selling and administrative expenses $12,120

Total fixed costs ($35,160)

Income from operations $31,420

Workings

•Variable cost of goods manufactured

= Total manufacturing cost - Fixed manufacturing cost

= $115,200 - $23,040

= $92,160

• Inventory at April 30

Calculate first, manufacturing cost per unit

= Variable cost of goods manufactured / Units manufactured

= $92,160/6,400 units

= $14.4

Therefore, Inventory at April 30

= $14.4 × 900 units

= $12,960

• Variable selling and administrative cost = Total selling and administrative cost - Fixed selling and administrative costs

= $24,740 - $12,120

= $12,620