he following data were adapted from a recent income statement of Procter & Gamble Company:

1		(in millions)
2	Sales	$84,167.00
3	Operating costs:
4	Cost of products sold	$42,428.00
5	Marketing, administrative, and other expenses	30,337.00
6	Total operating costs	$72,765.00
7	Income from operations	$11,402.00

Assume that the variable amount of each category of operating costs is as follows:

1		(in millions)
2	Cost of products sold	$23,760.00
3	Marketing, administrative, and other expenses	12,135.00

Required:

A.

Based on the data given, prepare a variable costing income statement for Procter & Gamble Company, assuming that the company maintained constant inventory levels during the period. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. A colon (:) will automatically appear if it is required. If a net loss is incurred, enter that amount as a negative number using a minus sign.

B.

If Procter & Gamble reduced its inventories during the period, what impact would that have on the income from operations determined under absorption costing?

Labels
Fixed costs
Amount Descriptions
Contribution margin
Contribution margin ratio
Fixed manufacturing costs
Fixed marketing, administrative, and other expenses
Income from operations
Loss from operations
Manufacturing margin
Planned contribution margin
Sales
Sales mix
Variable cost of products sold
Variable marketing, administrative, and other expenses

A. Based on the data given, prepare a variable costing income statement for Procter & Gamble Company, assuming that the company maintained constant inventory levels during the period. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. A colon (:) will automatically appear if it is required. If a net loss is incurred, enter that amount as a negative number using a minus sign.

Procter & Gamble Company

Variable Costing Income Statement (assumed)

(in millions)

1
2
3
4
5
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7
8
9

B. If Procter & Gamble reduced its inventories during the period, what impact would that have on the income from operations determined under absorption costing?

Income from operations would be lower.

Income from operations would be the same.

Income from operations would be higher.