PROBLEM ONE The manager of the manufacturing division of Bumble Bee Inc. does no

Question

PROBLEM ONE The manager of the manufacturing division of Bumble Bee Inc. does not understand why income went down when sales went up. Some of the information he has selected for evaluation includes: April Units produced 100,000 70,000 80,000 85,000 March Units sold In addition, the selling price was $28; variable production costs were $10; variable selling expenses were $4; fixed overhead costs were $1,000,000 each month; fixed selling expenses are $60,000 each month. I expected to produce 80,000 units each month. Beginning inventory for March was 5,000 units. REQUIRED: Prepare a variable cost income statement for each month. Prepare an absorption cost income statement for each month. 3. Reconcile the income statements for each of the two months.

Explanation / Answer

Question - 2

Working.......... for CGS ( cost of goods sold)

Question - 3

Reconcilation of Profits

VARIABLE COST INCOME STATEMENT March April Sales   = Units sold * 28 2240000 2380000 (-) Variable cost = Units sold * 14 1120000 1190000 Contribution = sales - variable cost 1120000 1190000 (-) Fixed cost = 1000,000 + 60,000 1060000 1060000 Profit 60000 130000

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