Question

Income Statements under Absorption Costing and Variable Costing

Joplin Industries Inc. manufactures and sells high-quality sporting goods equipment under its highly recognizable J-Sports logo. The company began operations on May 1 and operated at 100% of capacity (42,900 units) during the first month, creating an ending inventory of 3,900 units. During June, the company produced 39,000 garments during the month but sold 42,900 units at $85 per unit. The June manufacturing costs and selling and administrative expenses were as follows:

	Number of Units		Unit Cost		Total Cost
Manufacturing costs in June 1 beginning inventory:
Variable	3,900		$34.00		$132,600
Fixed	3,900		13.00		50,700
Total			$47.00		$183,300
Manufacturing costs in June:
Variable	39,000		$34.00		$1,326,000
Fixed	39,000		14.30		557,700
Total			$48.30		$1,883,700
Selling and administrative expenses in June:
Variable	42,900		16.90		$725,010
Fixed	42,900		7.00		300,300
Total			23.90		$1,025,310

a. Prepare an income statement according to the absorption costing concept for June.

Joplin Industries Inc.
Absorption Costing Income Statement
For the Month Ended June 30
Sales		$
Cost of goods sold:
Beginning inventory	$
Cost of goods manufactured
Total cost of goods sold
Gross profit		$
Selling and administrative expenses
Income from operations		$

b. Prepare an income statement according to the variable costing concept for June.

Joplin Industries Inc.
Variable Costing Income Statement
For the Month Ended June 30
Sales		$
Variable cost of goods sold
Manufacturing margin		$
Variable selling and administrative expenses
Contribution margin		$
Fixed costs:
Fixed manufacturing costs	$
Fixed selling and administrative expenses
Total fixed costs
Income from operations		$

Answer 1