Accounting 26th Edition by Carl Warren ,Jim Reeve ,Jonathan Duchac

Exercise 8

Variable costing income statement
On July 31, 2016, the end of the first month of operations, Rhys Company prepared the following income statement, based on the absorption costing concept:

a. Prepare a variable costing income statement, assuming that the fixed manufacturing costs were $132,000 and the variable selling and administrative expenses were $115,200.
b. Reconcile the absorption costing income from operations of $1,656,000 with the variable costing income from operations determined in (a).