On July 31, the end of the first month of operations, Rhys Company prepared the following income statement, based on the absorption costing concept: Sales (96,000 units) $4,440,000 Cost of goods sold: Cost of goods manufactured $3,120,000 Less ending inventory (24,000 units) 624,000 Cost of goods sold 2,496,000 Gross profit $1,944,000 Selling and administrative expenses 288,000 Income from operations $1,656,000 a. Prepare a variable costing income statement, assuming that the fixed manufacturing costs were $132,000 and the variable selling and administrative expenses were $115,200. In your computations, round unit costs to two decimal places and round final answers to the nearest dollar. Rhys CompanyIncome Statement-Variable CostingFor the Month Ended July 31 $- Select - Variable cost of goods sold: $- Select - - Select - - Select - $- Select - - Select - $- Select - Fixed costs: $- Select - - Select - - Select - Income from operations $fill in the blank b. Reconcile the absorption costing income from operations of $1,656,000 with the variable costing income from operations determined in (a). Reconciliation of Absorption and Variable Costing Income Absorption costing income from operations $fill in the blank Variable costing income from operations fill in the blank Difference $fill in the blank
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Variable Costing Income Statement
On July 31, the end of the first month of operations, Rhys Company prepared the following income statement, based on the absorption costing concept:
| Sales (96,000 units) | $4,440,000 | |||
| Cost of goods sold: | ||||
| Cost of goods manufactured | $3,120,000 | |||
| Less ending inventory (24,000 units) | 624,000 | |||
| Cost of goods sold | 2,496,000 | |||
| Gross profit | $1,944,000 | |||
| Selling and administrative expenses | 288,000 | |||
| Income from operations | $1,656,000 |
a. Prepare a variable costing income statement, assuming that the fixed
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$- Select - | |
| Variable cost of goods sold: | ||
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$- Select - | |
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- Select - | |
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- Select - | |
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$- Select - | |
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- Select - | |
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$- Select - | |
| Fixed costs: | ||
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$- Select - | |
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- Select - | - Select - |
| Income from operations | $fill in the blank |
b. Reconcile the absorption costing income from operations of $1,656,000 with the variable costing income from operations determined in (a).
| Absorption costing income from operations | $fill in the blank |
| Variable costing income from operations | fill in the blank |
| Difference | $fill in the blank |
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