Financial and Managerial Accounting: P20-1A During the first month of operations (Zap Electronics)
Financial and Managerial Accounting PROBLEM 20-1A Absorption and variable costing income statements During the first month of operations ended September 30, 2008, Zap Electronics Inc. manufactured 7,400 modems, of which 6,950 were sold. Operating data for the month are summarized as follows: Sales 764,500 Manufacturing costs: Direct materials 362,600 Direct labor 111,000 Variable manufacturing costs 96,200 Fixed manufacturing costs 48,100 617,900 Selling and administrative expense: Variable 59,075 Fixed 27,800 86,875
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).