Absorption and Variable Costing Income Statements

During the first month of operations ended July 31, YoSan Inc. manufactured 2,400 flat panel televisions, of which 2,000 were sold. Operating data for the month are summarized as follows:

Sales		$2,150,000
Manufacturing costs:
Direct materials	$960,000
Direct labor	420,000
Variable manufacturing cost	156,000
Fixed manufacturing cost	288,000	1,824,000
Selling and administrative expenses:
Variable	$204,000
Fixed	96,000	300,000

Required:

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1. Prepare an income statement based on the absorption costing concept.

YoSan Inc. Absorption Costing Income Statement For the Month Ended July 31

C		$- Select -
Cost of goods sold:
	$- Select -
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		$- Select -
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2. Prepare an income statement based on the variable costing concept.

YoSan Inc. Variable Costing Income Statement For the Month Ended July 31

		$- Select -
Variable cost of goods sold:
	$- Select -
	- Select -
		- Select -
. .		$- Select -
		- Select -
		$- Select -
Fixed costs:
	$- Select -
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	blank	- Select -
		$- Select -

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3. Explain the reason for the difference in the amount of operating income reported in (1) and (2).

The operating income reported under

absorption OR variable

costing exceeds the operating income reported under

absorption OR variable

costing, due to

fixed OR variable

manufacturing costs that are deferred to a future month under

absorption OR variable

costing.