Reference no: EM132551087

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 (96,000 units)$4,440,000

Cost of goods sold:

Cost of goods manufactured$3,120,000

Less ending inventory (24,000 units)624,000

Cost of goods sold2,496,000

Gross profit$1,944,000

Selling and administrative expenses288,000

Income from operations$1,656,000

Question 1: variable costing income statement, assuming that the fixed manufacturing costs were $132,000 and the variable selling and administrative expenses were $115,200. In your computations, round unit costs to two decimal places and round final answers to the nearest dollar.

Rhys CompanyIncome Statement-Variable CostingFor the Month Ended July 31Sales

$Variable cost of goods sold:Variable cost of goods manufactured

$Less ending inventory

Variable cost of goods sold

Manufacturing margin

$Variable selling and administrative expenses

Contribution margin

$Fixed costs:Fixed manufacturing costs

$Fixed selling and administrative expenses

Income from operations$

Question 2: Reconcile the absorption costing income from operations of $1,656,000 with the variable costing income from operations determined in (1).

Reconciliation of Absorption and Variable Costing Income Absorption costing income from operations$Variable costing income from operationsDifference$

Question 3: How is factory overhead reported in each of the two income statements?