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Horngren'S Financial And Managerial Accounting
Found in: Page 1171

Short Answer

Question: Preparing variable costing income statements, production less than sales

Refer to your answers to Exercise E21-16. In May 2018, ReVitalAde produced 22,000 cases of powdered drink mix and sold 23,000 cases, of which 1,000 were produced in April. The sales price was $29, variable costs were $12 per case ($9 manufacturing and $3 selling and administrative), and total fixed costs were $100,000 ($91,000 manufacturing and $9,000 selling and administrative).


  1. Prepare the May income statement using variable costing.
  2. Determine the balance in the Finished Goods Inventory as of May 31.


  1. Operating income is $291,000
  2. Finished goods inventory as of May 31 is 0.

See the step by step solution

Step by Step Solution

Step 1: Income statement using variable costing



Net sales revenue ($29x23,000)


Less: Variable costs ($12x23,000)


Contribution margin


Less: Fixed costs

Fixed costs of goods sold


Fixed selling and administrative cost


Operating Income


Step 2: Balance of finished goods inventory as of May 31.

Ending balance in Finished Goods Inventory = Beginning balance + Units Produced − Units sold

= 1,000 units + 22,000 units - 23,000 units

= 0 units

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