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Variable Costing Income Statement

On April 30, the end of the first month of operations, Joplin Company prepared the following income statement, based on the absorption costing concept:

Joplin Company
Absorption Costing Income Statement
For the Month Ended April 30
Line Item Description Amount Amount
Sales (3,300 units) $125,400
Cost of goods sold:
Cost of goods manufactured (3,894 units) $105,138
Inventory, April 30 (594 units) (16,038)
Total cost of goods sold (89,100)
Gross profit $36,300
Selling and administrative expenses (21,480)
Operating income $14,820

If the fixed manufacturing costs were $25,233.12 and the fixed selling and administrative expenses were $10,520, prepare an income statement according to the variable costing concept. Round all final answers to whole dollars.

Joplin Company
Variable Costing Income Statement
For the Month Ended April 30
Line Item Description Amount Amount

$- Select -
Variable cost of goods sold:

$- Select -

- Select -

- Select -

$- Select -

- Select -

$- Select -
Fixed costs:

$- Select -

- Select -

- Select -

$- Select -

Answer 1

To prepare a Variable Costing Income Statement, we need to calculate the variable costs associated with both the cost of goods sold and selling and administrative expenses. Here's a breakdown of how to do that based on the information provided.

### Step 1: Calculate Variable Cost of Goods Sold (COGS)
1. **Total Cost of Goods Manufactured**: $105,138
2. **Fixed Manufacturing Costs**: $25,233.12
3. **Total Variable Cost of Goods Manufactured**: \( \text{Total Manufacturing Costs} - \text{Fixed Manufacturing Costs} \)

\[
\text{Total Variable Cost of Goods Manufactured} = 105,138 - 25,233.12 = 79,904.88
\]

4. Determine the variable COGS:
- Units sold: 3,300
- Units manufactured: 3,894
- Total variable cost associated with produced units: $79,904.88
- Variable cost per unit manufactured:

\[
\text{Variable cost per unit} = \frac{79,904.88}{3,894} = 20.50 \text{ (approx)}
\]

- Variable COGS for units sold:

\[
\text{Variable COGS} = 3,300 \text{ units} \times 20.50 \approx 67,650
\]

### Step 2: Contribution Margin
- **Sales**: $125,400
- **Variable COGS**: $67,650
- **Gross Profit** (Contribution Margin):

\[
\text{Gross Profit} = \text{Sales} - \text{Variable COGS} = 125,400 - 67,650 = 57,750
\]

### Step 3: Selling and Administrative Expenses
1. **Fixed Selling and Administrative Expenses**: $10,520 (this will not be affected, it's fixed)
2. We need to calculate the Variable Selling and Administrative Expenses:
- If no variable selling and administrative expenses are provided, we assume they are $0 (but you can adjust based on specific information if provided).
3. **Total Variable Selling & Administrative Expenses**: Assuming none.

### Step 4: Prepare the Variable Costing Income Statement
Now we can compile all this data into the variable costing income statement:

**Joplin Company**
**Variable Costing Income Statement**
**For the Month Ended April 30**

| Line Item Description | Amount |
|-------------------------------------------|----------------|
| Sales (3,300 units) | $125,400 |
| Variable cost of goods sold: | |
| Variable COGS (3,300 units) | $(67,650) |
| **Contribution Margin** | **$57,750** |
| Selling and administrative expenses: | |
| Variable Selling & Admin Expenses | $(0) |
| Fixed Selling & Admin Expenses | $(10,520) |
| **Operating Income** | **$47,230** |

### Summary
- Contribution Margin: $57,750
- Fixed Selling & Administrative Expenses: $10,520
- Operating Income: $47,230

You would fill out the select fields of the income statement as follows:

- **Sales**: $125,400
- **Variable Cost of Goods Sold**: $(67,650)
- **Contribution Margin**: $57,750
- **Variable Selling & Administrative Expenses**: $(0)
- **Fixed Selling & Administrative Expenses**: $(10,520)
- **Operating Income**: $47,230

This outlines the Variable Costing Income Statement for Joplin Company for the month ended April 30.