Homework SourseBionic Cotton Inc manufactures and sells highquality sportin
Bionic Cotton Inc. manufactures and sells high-quality sporting goods equipment under its highly recognizable Cool Cat logo. The company began operations on January 1, 2016, and operated at 100% of capacity (84,000 units) during the first month, creating an ending inventory of 7,000 units. During February, the company produced 76,600 garments during the month but sold 83,600 units at $106 per unit. The February manufacturing costs and selling and administrative expenses were as follows:
* Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if it is required. If a net loss is incurred, enter that amount as a negative number using a minus sign.
LABELS:
Variable selling and administrative expenses
A. Prepare an income statement according to the absorption costing concept for February. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if it is required. If a net loss is incurred, enter that amount as a negative number using a minus sign.
Bionic Cotton Inc.
Absorption Costing Income Statement
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Cost of goods sold:
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B. Prepare an income statement according to the variable costing concept for February. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if it is required. If a net loss is incurred, enter that amount as a negative number using a minus sign.
Bionic Cotton Inc
Variable Costing Income Statement
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| Number of Units | Unit Cost | Total Cost | |
| Manufacturing costs in February beginning inventory: | |||
| Variable | 7,000 | $50 | $ 350,000 |
| Fixed | 7,000 | 10 | 70,000 |
| Total | $60 | $420,000 | |
| February manufacturing costs: | |||
| Variable | 76,600 | $50 | $ 3,830,000 |
| Fixed | 76,600 | 12 | 919,200 |
| Total | $62 | $4,749,200 | |
| Selling and administrative expenses: | |||
| Variable | $ 1,370,000 | ||
| Fixed | 320,000 | ||
| Total | $1,690,000 |
Solution
Solution A:
Solution B:
Solution C:
The reason for the difference in the amount of income from operations reported in A and B is because of fixed manufacturing overhead available in beginning inventory of $70,000. As this fixed overhead is expensed in variable costing in january, therefore variable costing income statement of february is higher than absorption costing income statement.
| Bitonic Cotton Inc. | ||
| Absorption Costing Income Statement | ||
| For the month ended February 29, 2016 | ||
| Particulars | Amount | |
| Sales | $8,861,600.00 | |
| Cost of goods sold: | ||
| Beginning inventory | $420,000.00 | |
| Add: Cost of goods manufactured | $4,749,200.00 | |
| Less: Ending inventory | $0.00 | |
| Cost of goods sold | $5,169,200.00 | |
| Gross Profit | $3,692,400.00 | |
| Selling and administrative expenses | $1,690,000.00 | |
| Net Operating income | $2,002,400.00 |
