Reference no: EM132881698
Problem - Variable costing income statement - On July 31, 2012, the end of the first month of operations, Toxic Company prepared the following income statement, based on the absorption costing concept:
Sales (40,000 units) $1,850,000
Cost of goods sold:
Cost of goods manufactured $1,300,000
Less ending inventory (10,000 units) 260,000
Cost of goods sold 1,040,000
Gross profit $810,000
Selling and administrative expenses 120,000
Income from operations $690,000
Required -
a. Prepare a variable costing income statement, assuming that the fixed manufacturing costs were $56,000 and the variable selling and administrative expenses were $48,000.
b. Reconcile the absorption costing income from operations of $690,000 with the variable costing income from operations determined in (a).