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During the first month of operations ended July 31, 2016, YoSan Inc. manufactured 2,400 flat panel televisions, of which 2,000 were sold. Operating data for the month are summarized as follows:

1	Sales			$2,150,000.00
2	Manufacturing costs:
3	Direct materials		$960,000.00
4	Direct labor		420,000.00
5	Variable manufacturing cost		156,000.00
6	Fixed manufacturing cost		288,000.00	1,824,000.00
7	Selling and administrative expenses:
8	Variable		$204,000.00
9	Fixed		96,000.00	300,000.00
		Required:
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).

Labels
Fixed costs
For the Month Ended July 31, 2016
July 31, 2016
Amount Descriptions
Contribution margin
Contribution margin ratio
Cost of goods manufactured
Cost of goods sold
Ending inventory
Fixed manufacturing costs
Fixed selling and administrative expenses
Gross profit
Income from operations
Loss from operations
Manufacturing margin
Planned contribution margin
Sales
Sales mix
Selling and administrative expenses
Variable cost of goods manufactured
Variable cost of goods sold
Variable selling and administrative expenses

1. Prepare an income statement based on the absorption costing concept. 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. Less, Plus or colons (:) will automatically appear if required. If a net loss is incurred, enter that amount as a negative number using a minus sign.

YoSan Inc.

Absorption Costing Income Statement

1
2	Cost of goods sold:
3
4
5
6
7
8

2. Prepare an income statement based on the variable costing concept. 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. Less, Plus or colons (:) will automatically appear if required. If a net loss is incurred, enter that amount as a negative number using a minus sign.

YoSan Inc.

Variable Costing Income Statement

1
2	Variable cost of goods sold:
3
4
5
6
7
8
9
10
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12

3. Explain the reason for the difference in the amount of income from operations reported in (1) and (2).

The income from operations reported under costing exceeds the income from operations reported under costing by the difference between the two, due to manufacturing costs that are deferred to a future month under costing.

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