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12 February, 23:54

On October 31, the end of the first month of operations, Maryville Equipment Company prepared the following income statement, based on the variable costing concept: Maryville Equipment Company Variable Costing Income Statement For the Month Ended October 31 Sales (220,000 units) $7,920,000 Variable cost of goods sold: Variable cost of goods manufactured $6,360,000 Inventory, October 31 (45,000 units) (1,080,000) Total variable cost of goods sold (5,280,000) Manufacturing margin $2,640,000 Variable selling and administrative expenses (330,000) Contribution margin $2,310,000 Fixed costs: Fixed manufacturing costs $530,000 Fixed selling and administrative expenses 100,000 Total fixed costs (630,000) Operating income $1,680,000 Prepare an income statement under absorption costing.

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  1. 13 February, 00:26
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    Income statement under absorption cost:

    Sales Revenue 7,920,000

    COGS 220,000 x 26 = (5,720,000)

    Gross profit: 2,200,000

    S&A expense: (990,000)

    variable: 330,000

    fixed: 630,000

    Operating Income 1,210,000

    Explanation:

    Variable cost of goods manufactured $6,360,000

    Fixed costs: Fixed manufacturing costs $530,000

    Under absorption cost, the company will distribute the manufacturing cost over the units produced:

    variable manufacturing cost: 6,360,000

    fixed manufacturing cost: 530,000

    Total cost: 6,890,00

    Units produced: 265,000

    units sold 220,000

    + ending inventory 45,000

    Cost per units: 26

    The selling and adminsitrative (S&A) will be count as period cost.
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