EX 20-6 Absorption costing income statement 1. Obj. 1Describe and illustrate rep

Question

EX 20-6 Absorption costing income statement 1. Obj. 1Describe and illustrate reporting income from operations under absorption and variable costing.On March 31, the end of the first month of operations, Sullivan Equipment Company prepared the following income statement, based on the variable costing concept: Sullivan Equipment Company Variable Costing Income Statement For the Month Ended March 31 $66,000,000 Variable cost of goods sold manufactured... $45,000,000 5400,000) Total variable cost of goods sold............................. 39,600,000 $26,400,000 2,400,000 24,000,000 Variable selling and administrative expenses.............. . . Fixed costs: Fixed selling and administrative expenses...... $ 7,500,000 375,000 7.875,000 $16,125,000 ncome from operations Prepare an income statement under absorption costing.

Explanation / Answer

Prepare income statement under absorption costing :

Sales 66000000 Cost of goods sold Cost of goods manufactured (45000000+7500000) 52500000 Less: Ending inventory (36000 units) (630000) Cost of goods sold (46200000) Gross profit 19800000 Selling and administrative expense (2775000) Net operating income 17025000

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