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Variable Costing Income Statement

On July 31, the end of the first month of operations, Rhys Company prepared the following income statement, based on the absorption costing concept:

Sales (16,000 units)					$1,296,000
Cost of goods sold:
	Cost of goods manufactured		$1,005,000
	Less ending inventory (4,000 units)		201,000
	Cost of goods sold				804,000
Gross profit					$492,000
Selling and administrative expenses					62,000
Income from operations					$430,000

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a. Prepare a variable costing income statement, assuming that the fixed manufacturing costs were $40,000 and the variable selling and administrative expenses were $28,000. In your computations, round unit costs to two decimal places and round final answers to the nearest dollar.

Rhys Company Income Statement-Variable Costing For the Month Ended July 31

Ending inventoryFixed selling and administrative expensesSalesVariable cost of goods manufacturedVariable selling and administrative expensesSales		$Sales
Variable cost of goods sold:
Fixed manufacturing costsFixed selling and administrative expensesSalesVariable cost of goods manufacturedVariable selling and administrative expensesVariable cost of goods manufactured	$Variable cost of goods manufactured
Less ending inventoryLess fixed selling and administrative expensesLess manufacturing costsLess salesLess variable selling and administrative expensesLess ending inventory	Less ending inventory
Ending inventoryFixed selling and administrative expensesSalesVariable cost of goods manufacturedVariable cost of goods soldVariable cost of goods sold		Variable cost of goods sold
Contribution marginManufacturing marginManufacturing margin		$Manufacturing margin
Ending inventoryFixed manufacturing costsFixed selling and administrative expensesSalesVariable selling and administrative expensesVariable selling and administrative expenses		Variable selling and administrative expenses
Contribution marginManufacturing marginContribution margin		$Contribution margin
Fixed costs:
Ending inventoryFixed manufacturing costsManufacturing marginSalesVariable cost of goods manufacturedFixed manufacturing costs	$Fixed manufacturing costs
Ending inventoryFixed selling and administrative expensesSalesVariable cost of goods manufacturedVariable selling and administrative expensesFixed selling and administrative expenses	Fixed selling and administrative expenses	Fixed selling and administrative expenses
Income from operations		$fill in the blank 5de7e40c4fa906f_20

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a. Review the variable costing income statement.

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b. Reconcile the absorption costing income from operations of $430,000 with the variable costing income from operations determined in (a).

blank Reconciliation of Absorption and Variable Costing Income blank

Absorption costing income from operations	$fill in the blank 11682a09301ffd8_1
Variable costing income from operations	fill in the blank 11682a09301ffd8_2
Difference	$fill in the blank 11682a09301ffd8_3

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