During the first month of operations ended August 31, Kodiak Fridgeration Company manufactured 40,000 mini refrigerators, of which 36,000 were sold. Operating data for the month are summarized as follows: 1 Sales $8,280,000.00 2 Manufacturing costs: 3 Direct materials $2,800,000.00 4 Direct labor 1,200,000.00 5 Variable manufacturing cost 800,000.00 6 Fixed manufacturing cost 440,000.00 5,240,000.00 7 Selling and administrative expenses: 8 Variable $540,000.00 9 Fixed 216,000.00 756,000.00 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 operating income reported in (1) and (2). * Be sure to complete the statement heading. Refer to the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon (:) will automatically appear if it is required. Enter amounts as positive numbers unless the amount is a calculation that results in a negative amount. For example: Net loss should be negative. 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 Operating income 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

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter7: Variable Costing For Management analysis

Section: Chapter Questions

Problem 1PA

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Question

During the first month of operations ended August 31, Kodiak Fridgeration Company manufactured 40,000 mini refrigerators, of which 36,000 were sold. Operating data for the month are summarized as follows:

1	Sales		$8,280,000.00
2	Manufacturing costs:
3	Direct materials	$2,800,000.00
4	Direct labor	1,200,000.00
5	Variable manufacturing cost	800,000.00
6	Fixed manufacturing cost	440,000.00	5,240,000.00
7	Selling and administrative expenses:
8	Variable	$540,000.00
9	Fixed	216,000.00	756,000.00

Required:

Prepare an income statement based on the absorption costing concept.*

Prepare an income statement based on the variable costing concept.*

Explain the reason for the difference in the amount of operating income reported in (1) and (2).

* Be sure to complete the statement heading. Refer to the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon (:) will automatically appear if it is required. Enter amounts as positive numbers unless the amount is a calculation that results in a negative amount. For example: Net loss should be negative.

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
Operating income
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

Instructions
Labels and Amount Descriptions
Absorption Costing Income Statement
Instructions
X
During the first month of operations ended August 31, Kodiak Fridgeration Company manufactured 40,000 mini refrigerators, of which 36,000 were sold. Operating data for the month
are summarized as follows:
1 Sales
$8,280,000.00
2 Manufacturing costs:
Direct materials
$2.800,000.00
Direct labor
1,200,000.00
4
Variable manufacturing cost
800,000.00
5
Fixed manufacturing cost
440,000.00
5,240,000.00
6
7 Selling and administrative expenses:
Variable
$540.000.00
Fixed
216,000.00
756,000.00
9
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 operating income reported in (1) and (2).

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