Ansara Company had the following abbreviated income statement for the year ended December 31, 20Y2: (in millions) Sales $18,769 Cost of goods sold $15,471 Selling, administrative, and other expenses 2,049 Total expenses $17,520 Income from operations $1,249 Assume that there were $3,860 million fixed manufacturing costs and $1,170 million fixed selling, administrative, and other costs for the year. The finished goods inventories at the beginning and end of the year from the balance sheet were as follows: January 1 $2,354 million December 31 $2,408 million Assume that 30% of the beginning and ending inventory consists of fixed costs. Assume work in process and materials inventory were unchanged during the period. a. Prepare an income statement according to the variable costing concept for Ansara Company for 20Y2. Round to nearest million.

Question

Giles

Business

15 December, 02:03

Ansara Company had the following abbreviated income statement for the year ended December 31, 20Y2: (in millions) Sales $18,769 Cost of goods sold $15,471 Selling, administrative, and other expenses 2,049 Total expenses $17,520 Income from operations $1,249 Assume that there were $3,860 million fixed manufacturing costs and $1,170 million fixed selling, administrative, and other costs for the year. The finished goods inventories at the beginning and end of the year from the balance sheet were as follows: January 1 $2,354 million December 31 $2,408 million Assume that 30% of the beginning and ending inventory consists of fixed costs. Assume work in process and materials inventory were unchanged during the period. a. Prepare an income statement according to the variable costing concept for Ansara Company for 20Y2. Round to nearest million.

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Elisabeth Stokes · Answer 1

Net income = - 819 million

Explanation:

Giving the following information:

Sales $18,769 Cost of goods sold $15,471 Selling, administrative, and other expenses 2,049 Total expenses $17,520 Income from operations $1,249 Assume that there were $3,860 million fixed manufacturing costs and $1,170 million fixed selling, administrative, and other costs for the year. The finished goods inventories at the beginning and end of the year from the balance sheet were as follows: January 1 $2,354 million December 31 $2,408 million Assume that 30% of the beginning and ending inventory consists of fixed costs.

COGS = beginning finished inventory + cost of goods manufactured - ending finished inventory

17,520 = 2,345 + X - 2,408

cost of goods manufactured = 17,583

Now, we have to separate the fixed components from the variable.

cost of goods manufactured = direct materials + direct labor + allocated manufacturing overhead

Variable costs = 17,583 - 3,860 = 13,723

We can calculate the variable cost of goods sold:

Variable costs manufacturing costs = 2345*0.70 + 13,723 - 2,408*0.70 = 13,678.9

Variable selling and administrative = 2,049 - 1,170 = 879

Income statement:

Sales = 18,769

Variable manufacturing costs = 13,678.9

Variable selling and administrative = 879

Contribution margin = 4,211.1

Fixed manufacturing costs = 3,860

Fixed selling and administrative = 1,170

Net income = - 818.9