During the first month of operations ended May 31, 2016, Frost Point Fridge Company manufactured 40,000 mini refrigerators, of which 36,000 were sold. Operating data for the month are summarized as follows:

Sales .............................................................................................. . $6,480,000

Manufacturing costs:

Direct materials ..................................................... . $3,200,000

Direct labor .............................................................. . 1,120,000

Variable manufacturing cost ......................................... . 880,000

Fixed manufacturing cost .............................................. . 560,000 5,760,000

Selling and administrative expenses:

Variable ....................................................................... . $ 648,000

Fixed .................................................................................288,000 936,000

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).

Answer rating: 100% (QA)

Answer 1 Prepare an income statement based on the absorption costing concept as shown below Incom... View the full answer