Question

On October 31, the end of the first month of operations, Morristown & Co. prepared the following income statement based on absorption costing:

Morristown & Co.

Absorption Costing Income Statement

For the Month Ended October 31

1	Sales (2,600 units)		$117,000.00
2	Cost of goods sold:
3	Cost of goods manufactured	$85,500.00
4	Ending inventory (400 units)	(11,400.00)
5	Total cost of goods sold		(74,100.00)
6	Gross profit		$42,900.00
7	Selling and administrative expenses		(21,500.00)
8	Operating income		$21,400.00

If the fixed manufacturing costs were $42,900 and the variable selling and administrative expenses were $14,600.

Required:

Labels
Fixed costs
For the Month Ended October 31
Amount Descriptions
Contribution margin
Ending inventory
Fixed manufacturing costs
Fixed selling and administrative expenses
Manufacturing margin
Operating income
Sales
Total fixed costs
Total variable cost of goods sold
Variable cost of goods manufactured
Variable selling and administrative expenses

Prepare an income statement using variable costing. 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 it is required. Enter amounts as positive numbers unless the amount is a calculation that results in a negative amount. For example: Net loss should be negative. Expenses should be positive.

Answer 1

Variable Costing Income Statement- Morristown & Co.
Sales		$117,000.00
Variabel Cost of Goods Manufactured =(85500-42900)	$42,600.00
Less: Ending Inventory (42600/3000)*400	$5,680.00
Variable Cost of Goods Sold		$36,920.00
Manufacturing Margin		$80,080.00
Less: Variable Selling & Admin Expense		$14,600.00
Contribution Margin		$65,480.00
FiXed Cost
Fixed Manufacturign Cost	$42,900.00
Fixed Seling & Administration Expense (21500-14600)	$6,900.00
total Fixed Expense		$49,800.00
Operatign Income		$15,680.00