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    Absorption and variable costing income statements

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    During the first month of operations ended August 31, 2007, Miracle Kitchen Appliance Company manufactured 1,420 refrigerators, of which 1,360 were sold. Operating data for the month are summarized as follows:

    Sales 924,800
    Manufacturing costs:
    Direct materials 340,800
    Direct Labor 134,900
    Variable manufacturing cost 63,900
    Fixed manufacturing cost 99,400 639,000
    Selling and administrative expenses
    Variable 81,600
    Fixed 34,000 115,600

    1. Prepare an income statement based on the absorption costing concept
    2. Prepare an income statement based on the variable costing concept.
    3. Explain the reason for the difference in the amount of income from operations reported in (1) and (2).

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    Excel file contains absorption and variable costing income statements.

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