Variable and absorption costing Ansara Company had the following abbreviated income statement for the year ended December 31, 20Y2: (in millions) Sales $18,769 Cost of goods sold $15,471 Selling, administrative, and other expenses 2,049 Total expenses $17,520 Income from operations $1,249 Assume that there were $3,860 million fixed manufacturing costs and $1,170 million fixed selling, administrative, and other costs for the year. The finished goods inventories at the beginning and end of the year from the balance sheet were as follows: January 1 $2,354 million December 31 $2,408 million Assume that 30% of the beginning and ending inventory consists of fixed costs. Assume work in process and materials inventor}' were unchanged during the period. A. Prepare an income statement according to the variable costing concept for Ansara Company for 20Y2. (Round numbers to nearest million.) B. Explain the difference between the amount of income from operations reported under the absorption costing and variable costing concepts. (Round numbers to nearest million.)

BuyFind

Financial & Managerial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337119207
BuyFind

Financial & Managerial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337119207

Solutions

Chapter
Section
Chapter 20, Problem 20.9EX
Textbook Problem

Variable and absorption costing

Ansara Company had the following abbreviated income statement for the year ended December 31, 20Y2:

(in millions)
Sales $18,769
Cost of goods sold $15,471
Selling, administrative, and other expenses 2,049
Total expenses $17,520
Income from operations $1,249

Assume that there were $3,860 million fixed manufacturing costs and $1,170 million fixed selling, administrative, and other costs for the year.

The finished goods inventories at the beginning and end of the year from the balance sheet were as follows:

January 1 $2,354 million

December 31 $2,408 million

Assume that 30% of the beginning and ending inventory consists of fixed costs. Assume work in process and materials inventor}' were unchanged during the period.

  1. A. Prepare an income statement according to the variable costing concept for Ansara Company for 20Y2. (Round numbers to nearest million.)
  2. B. Explain the difference between the amount of income from operations reported under the absorption costing and variable costing concepts. (Round numbers to nearest million.)

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Chapter 20 Solutions

Financial & Managerial Accounting
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