Question Content Area

Roller Paint Co. reported the following data for the month of September. There were no beginning inventories and all units were completed (no work in process).

		Total Cost		Number of Units		Unit Cost
Manufacturing costs:
Variable		$465,000		30,000		$15.50
Fixed		210,000		30,000		7.00
Total		$675,000				$22.50

Selling and administrative expenses:
Variable	$2.00	per unit sold
Fixed	$39,000

In the month of September, 28,000 of the 30,000 units manufactured were sold at a price of $80.00 per unit.

Question Content Area

a. Prepare a variable costing income statement.

Fixed manufacturing costsFixed selling and administrative expensesSalesVariable cost of goods manufacturedVariable selling and administrative expenses		$- Select -
Variable cost of goods sold:
Fixed manufacturing costsFixed selling and administrative expensesVariable cost of goods manufacturedVariable selling and administrative expensesWages expense	$- Select -
Add ending inventoryAdd fixed selling and administrative expensesLess ending inventoryLess fixed manufacturing costsLess variable selling and administrative expenses	- Select -
Fixed manufacturing costsFixed selling and administrative expensesVariable cost of goods soldVariable selling and administrative expensesUtilities expense		- Select -
Manufacturing margin		$fill in the blank 817b7afdcff0ff5_9
Fixed manufacturing costsFixed selling and administrative expensesUtilities expenseVariable selling and administrative expensesWages expense		- Select -
Contribution margin		$fill in the blank 817b7afdcff0ff5_12
Fixed costs:
Fixed manufacturing costsInterest expenseLess ending inventorySalesVariable cost of goods manufactured	$- Select -
Fixed selling and administrative expensesLess ending inventorySalesVariable cost of goods manufacturedWages expense	- Select -	- Select -
Income from operations		$fill in the blank 817b7afdcff0ff5_18

Question Content Area

b. Prepare an absorption costing income statement.

Cost of goods manufacturedCost of goods soldLess ending inventorySalesSelling and administrative expenses		$- Select -
Cost of goods sold:
Contribution marginCost of goods manufacturedSalesSelling and administrative expensesUtilities expense	$- Select -
Add ending inventoryAdd fixed selling and administrative expensesLess ending inventoryLess fixed manufacturing costsLess variable selling and administrative expenses	- Select -
Cost of goods sold		fill in the blank c1c956f82040fd6_7
Gross profit		$fill in the blank c1c956f82040fd6_8
Cost of goods manufacturedEnding inventoryRent expenseSalesSelling and administrative expenses		- Select -
Income from operations		$fill in the blank c1c956f82040fd6_11

Question Content Area

c. Briefly explain why there is a difference in income from operations between the two methods.

The difference in the amount of income from operations is a result of the treatment of

fixed manufacturing expenses selling and administrative cost

.