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Income Statements under Absorption Costing and Variable Costing Joplin Industries Inc. manufactures and sells high-quality sporting Goods equipment under its highly recognizable J-Sports logo. The company began operations on May 1 and operated at 100% of capacity (36,300 units) during the first month, creating an ending inventory of 3,300 units. During June, the company produced 33,000 garments during the month but sold 36,300 units at $85 per unit. The June manufacturing costs and selling and administrative expenses were as follows: Number of Units Unit Cost Total Cost Manufacturing costs in June 1 beginning inventory: Variable 3,300 3,300 $34.00 13.00 $112,200 42,900 rived Total $47.00 $155,100 Manufacturing costs in June Variable 33,000 33.000 Fixed $34.00 14.30 $48.30 $1,122,000 471,900 $1,593,900 Total Selling and administrative expenses in June: Variable 36,300 36,300 16.90 7.00 23.90 $613,470 254,100 $867,570 Fixed Total a. Prepare an income statement according to the absorption costing concept for June a. Prepare an income statement according to the absorption costing concept for June. Joplin Industries Inc. Absorption Costing Income Statement For the Month Ended June 30 Gross profit Cost of goods sold: Beginning inventory Cost of goods manufactured Total cost of goods sold Gross profit Selling and administrative expenses Income from operations b. Prepare an income statement according to the variable costing concept for June. Joplin Industries Inc. Variable Costing Income Statement For the Month Ended June 30 Sales Variable cost of goods sold Manufacturing margin Contribution margin x. Manufacturing margin Contribution margin Contribution margin Feed costs: Fixed manufacturing costs Faced selling and administrativexpenses dropdown Total fixed costs Income from operations Feedback Ok My Work b. Under variable costing, the cost of goods manufactured includes only variable manufacturing costs b. Under variable costing, the cost of goods manufactured includes only variable marfacturing costs Leaming Objective 1 c. What is the reason for the difference in the amount of income from operations reported in (a) and (b)? Under the absorption costing method, the fixed manufacturing cost included in the cost of goods sold is matched with the revenues. Under variable costing of the fixed manufacturing cost is deducted in the period in which it is incurred, regardless of the amount of inventory change. Thus, when inventory decreases, the absorption costing income statement will have a lower income from operations

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