Please do all the steps thank you Martys Entrees produces fr

Please do all the steps thank you!

Marty\'s Entrees produces frozen meals, which it sells for $8 each. The company uses the FIFO inventory costing method, and t computes a new monthly fixed manufacturing overhead rate based on the actual number of meals produced that month. All costs and production levels are exactly as planned. The following data are from the company\'s first two months in business: EEB (Click the icon to view the data.) Requirements 1. Compute the product cost per meal produced under absorption costing and under variable costing. Do this first for January and then for February 2. Prepare separate monthly income statements for January and for February, using the following: a. Absorption costing b. Variable costing 3. Is operating income higher under absorption costing or variable costing in January? In February? Explain the pattern of differences in operating income based on absorption costing versus variable costing January 31 February 28 Sales revenue Less. Vaniable expenses Cost of goods sold Operating expenses Contribution margin Less: Fixed expenses Fixed manufacturing overhead Fixed operating expenses Operating expenses

Solution

Construct The Absorption Costing Unit Product Cost Jan Feb Variable Manufacturing Expense 4 4 Fixed Manufacturing overheads 0.75 0.80 Absorption costing unit prroduct cost 4.75 4.80 Compute the Variable costing Unit Product cost Jan Feb Variable Manufacturing Expense 4 4 Variable costing unit prroduct cost 4 4 Construct the Absorption Costing Income Statement Under FIFO Jan Feb Sales $10,400 $12,800 Cost of Goods sold 6175 7665 (300*4.75+1300*4.80) Gross Margin $4,225 $5,135 Selling and distribution expense 2,900 3,500 Net operating income 1,325 1,635 Construct The Variable Costing Income Statement under FIFO Jan Feb Sales 10,400 12,800 Less: Variable cost    variable cost of goods sold 5,200 6,400    Variable selling expense 2,600 7,800 3,200 9,600 Contribution margin 2,600 3,200 Fixed expense:    Fixed Manufacturing overheads 1,200 1,200    Fixed selling expense 300 300 Net operating Income 1,100 1,700 Req 3: The net income under Absorption costing in Jan is higher as compated to variablecosting. This is due to the fact that ending inventory has increased and fixed Manufacturing Ohh has been deferred. The net income under variable costing is higher in Feb than absorption costing. This is due to fact that under absorption costing, fixed manufacturing OH has been released due to fall in the level of ending inventory.