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During the first month of operations ended August 31, Kodiak Fridgeration Company manufactured 80,000 mini refrigerators,...


During the first month of operations ended August 31, Kodiak Fridgeration Company manufactured 80,000 mini refrigerators, of
Required: 1. Prepare an income statement based on the absorption costing concept. 2. Prepare an income statement based on th
orption COSURIY HIColle Jlalui il Labels and Amount Descriptions Labels August 31 Cost of goods sold Fixed costs For the Mont
Labels and Amount Descriptions Gross profit Income from operations Inventory, August 31 Loss from operations Manufacturing ma
During the first month of operations ended August 31, Kodiak Fridgeration Company manufactured 80,000 mini refrigerators, of which 72,000 were sold. Operating data for the month are summarized as follows: 1 Sales $10,800,000.00 1 Manufacturing costs: Direct materials Direct labor $6,400,000.00 1,600,000.00 1.280,000.00 320,000.00 Variable manufacturing cost 9,600,000.00 Fixed manufacturing cost Selling and administrative expenses: Variable $1,080,000.00 180,000.00 Fixed 1,260,000.00
Required: 1. Prepare an income statement based on the absorption costing concept." 2. Prepare an income statement based on the variable costing concept." 3. Explain the reason for the difference in the amount of income from operations reported in (1) and (2). *Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon () will automatically appear if required. Enter Inventory, August 31 as a negative number using a minus sign. If a net loss is incurred, enter that amount as a negative number using a minus sign.
orption COSURIY HIColle Jlalui il Labels and Amount Descriptions Labels August 31 Cost of goods sold Fixed costs For the Month Ended August 31 Variable cost of goods sold Amount Descriptions Contribution margin Contribution margin ratio Cost of goods manufactured Fixed manufacturing costs Fixed selling and administrative expenses Gross profit 0.00 Income from operations Inventory, August 31
Labels and Amount Descriptions Gross profit Income from operations Inventory, August 31 Loss from operations Manufacturing margin Planned contribution margin Sales Sales mix Selling and administrative expenses Total cost of goods sold Total fixed costs Total variable cost of goods sold Variable cost of goods manufactured Variable selling and administrative expenses
0 0
Report
Answer #1
WORKING NOTES: 1
CALCUALTION OF cost of production units by using absorption and variable Costing
Opening stock 0
Unit Produced = 80000
Unit Sold = 72000
Closing Stock = 8000
CALCULATION OF PER UNIT COST Per unit Cost
Direct Material $                 64,00,000 $                                80
Direct Labour $                 16,00,000 $                                20
Vairable Manufacturing Overhead $                 12,80,000 $                                16
Fixed Manufacturing Overhead $                    3,20,000 $                                  4
Cost of Production per unit $                 96,00,000 $                             120
WORKING NOTES: 2
Particulars Absorption Costing Variable Costing
Direct Material $                                80 $                                80
Direct Labour $                                20 $                                20
Vairable Manufacturing Overhead $                                16 $                                16
Fixed Manufacturing Overhead $                                  4 $                                 -  
Cost of Production per unit $                          120.0 $                       116.00
SOLUTION : 1
ABOSRPTION COSTING INCOME STATEMENTS Absorption Costing
Sales $              1,08,00,000
Cost of Goods Sold
Beginning inventory $                                 -  
Cost of Goods Manufactured $                 96,00,000
Less: Ending Inventory (8,000 X $ 120) $                    9,60,000
Cost of Goods Sold $                 86,40,000
Gross Profit $                 21,60,000
Less : Selling Expenses
Fixed Selling Expenses $                 10,80,000
Variable Selling Expenses(40,000 units * 3) $                    1,80,000
Net Income $                    9,00,000
SOLUTION : 2
VARIABLE COSTING INCOME STATEMENTS Variable Costing
Sales $              1,08,00,000
Cost of Goods Sold
Beginning inventory $                                 -  
Cost of Goods Manufactured (80,000 units X $ 116) $                 92,80,000
Less: Ending Inventory (8,000 Units X $ 116) $                    9,28,000
Cost of Goods Sold $                 83,52,000
Selling Expenses $                 10,80,000
Gross Profit $                 13,68,000
Less: Fixed Manufacturing overhead $                    3,20,000
Less : Fixed Selling Expenses $                    1,80,000
Net Income $                    8,68,000
SOLUTION : 3
Difference in profit in both method is due to closing inventory. In absorption costing Fixed manufacturing
overhead is charged on cost of goods sold but in variable costing this expenses is charged as periodical cost
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