Variable and Absorption Costing-Service Company Lawn RX, Inc. prepares a variable costing income statement for internal management and an absorption costing income statement for its bank. Lawn RX provides a quarterly lawn care service that is sold for $155. The variable and fixed cost data are as follows:
Direct labor $100.00
Overhead Variable cost per unit $7
Fixed cost (annual) $100,000
Marketing, general and administrative Variable cost (per service contract completed) $8
Administrative expenses (fixed - annual cost) $42,000
During 2016, 10,000 service contracts were signed and 9,500 service contracts were completed. Lawn RX had no service contracts at the beginning of the year.
Required:
a. Calculate reported income for management. Do not use negative signs with any answers.
b. Calculate reported income for the bank. Do not use negative signs with any answers.
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