During the first month of operations ended September 30, 2010, Hercules Video Inc. manufactured 2,160 computer monitors, of which 2,000 were sold. Operating data for the month are summarized as follows:

Instructions
1. Prepare an income statement based on the absorption costing concept.
2. Prepare an income statement based on the variable costing concept.
3. Explain the reason for the difference in the amount of income from operations reported in (1) and(2).

Transcribed Image Text:

Sales Manufacturing costs: $1,900,000 Direct materials Direct labor Variabie manufacturing cost -.. - . . Fixed manufacturing cost $756,000 324,000 120,960 226,300 .- 800 1427,760 -.- Selling and administrative expenses: Variable . . Fixed S182,000 84,000 . . 266,000