Problem 6-20B Variable Costing Income Statement; Reconciliation [LO6-2, LO6-3] D
ID: 2733040 • Letter: P
Question
Problem 6-20B Variable Costing Income Statement; Reconciliation [LO6-2, LO6-3]
During Gates Company’s first two years of operations, the company reported absorption costing net operating income as follows:
Prepare a variable costing contribution format income statement for each year.
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Reconcile the absorption costing and variable costing net operating income figures for each year. (Loss and deduction amounts should be indicated with a minus sign.)
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During Gates Company’s first two years of operations, the company reported absorption costing net operating income as follows:
Explanation / Answer
Solution.
2.
Gates Company’s Variable Costing Income Statement Year 1 Year 2 Sales 864,000.00 1,152,000.00 Variable expenses: Variable production costs (288,000.00) (384,000.00) Variable selling & admin costs (28,000.00) (32,000.00) Total variable expenses (316,000.00) (416,000.00) Contribution Margin 548,000.00 736,000.00 Fixed expenses: Fixed manufacturing overheads (151,200.00) (151,200.00) Fixed selling & admin costs (390,000.00) (390,000.00) Total fixed expenses (541,200.00) (541,200.00) Net income 6,800.00 194,800.00