During the first month of operations ended August 31, Kodiak Fridgeration Compan
ID: 2544937 • Letter: D
Question
During the first month of operations ended August 31, Kodiak Fridgeration Company manufactured 80,000 mini refrigerators, of which 72,000 were sold. Operating data for the month are summarized as follows:
1
Sales
$10,800,000.00
2
Manufacturing costs:
3
Direct materials
$6,400,000.00
4
Direct labor
1,600,000.00
5
Variable manufacturing cost
1,280,000.00
6
Fixed manufacturing cost
320,000.00
9,600,000.00
7
Selling and administrative expenses:
8
Variable
$1,080,000.00
9
Fixed
180,000.00
1,260,000.00
Labels and Amount Descriptions
Absorption Costing Income Statement
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1. Prepare an income statement based on the absorption costing concept. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if required. Enter Inventory, August 31 as a negative number using a minus sign. If a net loss is incurred, enter that amount as a negative number using a minus sign.
Score: 64/64
Kodiak Fridgeration Company
Absorption Costing Income Statement
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Points:
16 / 16
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Sales - (Cost of Goods Manufactured - Ending Inventory*) = Gross Profit; Gross Profit - Selling and Administrative Expenses = Income from Operations.
* (Manufactured Units - Sold Units) x (Total Manufacturing Costs/Manufactured Units)
Variable Costing Income Statement
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2. Prepare an income statement based on the variable costing concept. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if required. Enter Inventory, August 31 as a negative number using a minus sign. If a net loss is incurred, enter that amount as a negative number using a minus sign.
Score: 29/106
Kodiak Fridgeration Company
Variable Costing Income Statement
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Points:
6.84 / 25
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Sales - Variable Cost of Goods Sold* = Manufacturing Margin; Manufacturing Margin - Variable Selling and Administrative Expenses = Contribution Margin; Contribution Margin - (Fixed Manufacturing Costs + Fixed Selling and Administrative Expenses) = Income from Operations.
*Variable Cost of Goods Sold = Variable Cost of Goods Manufactured - [(Manufactured Units - Sold Units) x (Variable Manufacturing Costs/Manufactured Units)]
Final Question
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3. Explain the reason for the difference in the amount of income from operations reported in (1) and (2).
The income from operations reported under absorption costing exceeds the income from operations reported under variable costing by the difference between the two, due to fixed manufacturing costs that are deferred to a future month under absorption costing.
Points:
4 / 4
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Recall that fixed factory overhead costs are considered a period expense under variable costing.
1
Sales
$10,800,000.00
2
Manufacturing costs:
3
Direct materials
$6,400,000.00
4
Direct labor
1,600,000.00
5
Variable manufacturing cost
1,280,000.00
6
Fixed manufacturing cost
320,000.00
9,600,000.00
7
Selling and administrative expenses:
8
Variable
$1,080,000.00
9
Fixed
180,000.00
1,260,000.00
Explanation / Answer
Solution 1:
Solution 2:
Solution 3:
The difference between net income under absorption costing and variable costing is due to fixed manufacturing cost was deferred in ending invenory under absorption costing. However in variable costing fixed cost completely charged to income statement.
Computation of Unit Product Cost - Absorption Costing Particulars Amount Per unit Direct material 6400000 $80.00 Direct Labor 1600000 $20.00 Variable manufacturing cost 1280000 $16.00 Fixed manufacturing cost 320000 $4.00 Unit Product Cost $120.00Related Questions
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