Question

The following data were adapted from a recent income statement of Ansara Company for the year ended December 31:

(in millions)
Sales	$16,940
Cost of goods sold	$(14,400)
Selling, administrative, and other expenses	(1,520)
Total expenses	$(15,920)
Operating income	$1,020

Assume that $3,730 million of cost of goods sold and $850 million of selling, administrative, and other expenses were fixed costs. Inventories at the beginning and end of the year were as follows:

Beginning inventory	$2,030
Ending inventory	$2,370

Also, assume that 40% of the beginning and ending inventories were fixed costs.

a. Prepare an income statement according to the variable costing concept for Ansara Company. Round numbers to nearest million.

Ansara Company
Variable Costing Income Statement (assumed)
For the Year Ended December 31
Variable cost of goods sold:
Beginning inventory
Fixed costs:

Answer 1