Answer:
1a Absorption Costing Income Statement for July:
Sales $104,000
<u>Cost of Goods Sold:</u>
Variable ($81,920/6,400*5,200) $66,560
Fixed ($15,360/6,400*5,200) $12,480 <u>$79,040</u>
Gross Profit $24,960
<u>Less: Selling and Administrative Expenses</u>
Variable $10,920
Fixed <u>$5,200</u> <u>$16,120</u>
Operating Income/(Loss) <u>$8,840</u>
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1b. Absorption Costing Income Statement for August
Sales $104,000
<u>Cost of Goods Sold</u>
Variable $66,560
Fixed <u>$18,240 </u> <u>$84,800</u>
Gross Profit $19,200
<u>Less: Selling & Admin Exp.</u>
Variable $10,920
Fixed <u>$5,200 </u> <u>$16,120</u>
Operating Income (Loss) <u>$3,080</u>
2. Variable Costing Income Statement for July and August:
July August
Sale A $104,000 $104,000
<u>Variable Expenses</u>
Manufacturing $66,560 $66,560
Selling and Administrative $10,920 $10,920
Total Variable Expenses B $77,480 $77,480
Contribution Margin A-B $26,520 $26,520
<u>Less: Fixed Costs</u>
Manufacturing $15,360 $15,360
Selling and Administrative <u>$5,200 </u> <u>$5,200</u>
Operating Income <u>$5,960 </u> <u>$5,960</u>
3 Reconciliation Statement for July and August:
July August
Absorption Costing Operating Income $8,840 $3,080
Add: Fixed Manufacturing Cost in $0 $2,880
Beginning Finished Goods Inventory
Less: Fixed Manufacturing Cost in ($2,880) $0
Ending Finished Goods Inventory
Variable Costing Operating Income $5,960 $5,960