On your way to a meeting with the board of directors, your assistant provides you with last month’s income statements–one based on the variable costing method and one based on the absorption costing method. Unfortunately, your assistant is new and has used absorption costing terminology for both income statements.

REQUIRED

A. Which income statement is based on the variable costing method? Explain.

B. Was production equal to, greater than, or less than sales for the month? Explain.

C. Calculate the amount of fixed overhead for the month.

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Income Statement 1 Income Statement 2 $8,672 Sales Cost of Goods Sold Other expenses $8,672 $4032 $3,000 4.180 7,180 $1492 3,100 7.132 $1,540 Net income