Problem: The manager of the manufacturing division of Bumble Bee Inc. does not understand why income went down when sales went up. Some of the information he has selected for evaluation includes:
|
|
March
|
April
|
May
|
|
Units produced
|
100,000
|
70,000
|
110,000
|
|
Units sold
|
80,000
|
85,000
|
90,000
|
In addition, the selling price was $28; variable production costs were $10; variable selling expenses were $4; fixed overhead costs were $1,000,000 each month; fixed selling expenses are $60,000 each month.
BBI expected to produce 80,000 units each month. Beginning inventory for March was 5,000 units.
Required:
Question 1: Create a variable cost income statement for each month.
Question 2: Create an absorption cost income statement for each month.
Question 3: Reconcile the income statements for each of the three months.
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