The following data were adapted from a recent income statement of Ansara Company for the year ended December 31: (in millions) Sales $18,840 Cost of goods sold $(16,010) Selling, administrative, and other expenses (1,700) Total expenses $(17,710) Operating income $1,130 Assume that $4,140 million of cost of goods sold and $940 million of selling, administrative, and other expenses were fixed costs. Inventories at the beginning and end of the year were as follows: Beginning inventory $2,260 Ending inventory $2,640 Also, assume that 40% of the beginning and ending inventories were fixed costs. a. Prepare an income statement according to the variable costing concept for Ansara Company.
The following data were adapted from a recent income statement of Ansara Company for the year ended December 31: (in millions) Sales $18,840 Cost of goods sold $(16,010) Selling, administrative, and other expenses (1,700) Total expenses $(17,710) Operating income $1,130 Assume that $4,140 million of cost of goods sold and $940 million of selling, administrative, and other expenses were fixed costs. Inventories at the beginning and end of the year were as follows: Beginning inventory $2,260 Ending inventory $2,640 Also, assume that 40% of the beginning and ending inventories were fixed costs. a. Prepare an income statement according to the variable costing concept for Ansara Company.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Variable and Absorption Costing
The following data were adapted from a recent income statement of Ansara Company for the year ended December 31:
| (in millions) | ||
| Sales | $18,840 | |
| Cost of goods sold | $(16,010) | |
| Selling, administrative, and other expenses | (1,700) | |
| Total expenses | $(17,710) | |
| Operating income | $1,130 |
Assume that $4,140 million of cost of goods sold and $940 million of selling, administrative, and other expenses were fixed costs. Inventories at the beginning and end of the year were as follows:
| Beginning inventory | $2,260 |
| Ending inventory | $2,640 |
Also, assume that 40% of the beginning and ending inventories were fixed costs.
a. Prepare an income statement according to the variable costing concept for Ansara Company.
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