Problem - During the first month of operations ended May 31, 2012, Dorm Fridge Company manufactured 12,500 microwaves, of which 11,700 were sold. Operating data for the month are summarized as follows:
Sales $2,106,000
Manufacturing costs:
Direct materials $1,050,000
Direct labor 312,500
Variable manufacturing cost 268,750
Fixed manufacturing cost 137,500 1,768,750
Selling and administrative expenses:
Variable $ 169,650
Fixed 76,050 245,700
Instructions
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).