Question

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

Answer 1

To prepare the income statement under the variable costing concept, we need to differentiate between variable and fixed costs. Under variable costing, only variable manufacturing costs are included in the cost of goods sold, and fixed manufacturing overhead is treated as a period cost.

### Given Data:

- **Sales**: $125,400
- **Cost of Goods Manufactured (3,894 units)**: $105,138
- **Cost of Goods Sold**: $89,100
- **Gross Profit**: $36,300
- **Selling and Administrative Expenses**: $21,480
- **Fixed Manufacturing Costs**: $25,233.12
- **Fixed Selling and Administrative Expenses**: $10,520
- **Ending Inventory (594 units)**: $16,038

### Step 1: Calculate Variable Cost of Goods Manufactured

First, we need to calculate the variable cost of goods manufactured.

To find the variable cost per unit, we subtract the fixed manufacturing costs from the total cost of goods manufactured.

#### Variable Cost of Goods manufactured :
- \( \text{Total COGM} = 105,138 \)
- \( \text{Fixed Manufacturing Costs} = 25,233.12 \)

\[
\text{Variable COGM} = \text{Total COGM} - \text{Fixed Manufacturing Costs} = 105,138 - 25,233.12 = 79,904.88
\]

### Step 2: Calculate Variable Cost of Goods Sold

The variable cost of goods sold can be calculated as follows:

\[
\text{Variable COGS} = \text{Variable COGM} - \text{Variable Ending Inventory}
\]

To find the variable ending inventory, we need to know the variable cost per unit manufactured and apply it to the ending inventory units:

#### Calculate the Variable Cost Per Unit:

\[
\text{Variable Cost per Unit} = \frac{\text{Variable COGM}}{\text{Units produced}} = \frac{79,904.88}{3,894} \approx 20.5 \text{ (rounded to two decimal places)}
\]

Now, calculate the variable ending inventory:

\[
\text{Variable Ending Inventory} = \text{Variable Cost per Unit} \times \text{Ending Inventory Units} = 20.5 \times 594 \approx 12,195
\]

#### Now calculate Variable COGS:

\[
\text{Variable COGS} = \text{Variable COGM} - \text{Variable Ending Inventory} = 79,904.88 - 12,195 \approx 67,710
\]

### Step 3: Prepare the Variable Costing Income Statement

Now, we can compile the variable costing income statement using the calculations above.

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

\[
\begin{align*}
\text{Sales} & \quad 125,400 \\
\text{Less: Variable Cost of Goods Sold} & (67,710) \\
\text{Gross Profit} & \quad 57,690 \\
\text{Less: Variable Selling and Administrative Expenses} & (21,480) \\
\text{Operating Income} & \quad 36,210 \\
\end{align*}
\]

### Final 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 |
| Less: Variable Cost of Goods Sold | $(67,710) |
| Gross Profit | $57,690 |
| Less: Variable Selling & Administrative Exp | $(21,480) |
| Operating Income | $36,210 |

Rounded final amounts:
- **Operating Income**: $36,210

Note: It's essential to round appropriately as per the user's instructions. In this case, sales, COGS, and expenses are reported in whole dollars.