Question

Income Statements under Absorption Costing and Variable Costing

Answer 1

The estimated income statement for the month shows a loss of $840000.

How to illustrate the income statement?

The estimated income statement for the month will be:

Sales = $25,600,000

Less: Cost of goods sold

Direct materials (320000 × 15) = $4,800,000

Direct labor (320000 × 17) = $5,440,000

Variable costing (320000 × 15) = $11,200,000

Fixed manufacturing cost = $1,530,000

Total cost of goods sold = $22970000

Gross profit = $25,600,000 - $22970000 = $2,630,000

Gross profit = $2,630,000

Less:

Variable selling and administrative expense = $3200000

Fixed selling and administrative = $270000

Loss from operations = $840000

Therefore, the estimated income statement for the month shows a loss of $840000.

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