Ireland Corporation planned to be in operation for three years.
-During the first year, 2017, it had no sales but incurred $240,000 in variable manufacturing expenses and $80,000 in fixed manufacturing expenses.
-In 2018, it sold half of the finished goods inventory from 2017 for $200,000 but it had no manufacturing costs.
-In 2019, it sold the remainder of the inventory for $240,000, had no manufacturing expenses and went out of business.
-Marketing and administrative expenses were fixed and totaled $40,000 each year.
Required:
a.Prepare an income statement for each year using absorption costing.
b.Prepare an income statement for each year using variable costing.

Question

Quizplus · Accepted Answer

The Answer of Ireland Corporation planned to be in operation for three years.
-During the first year, 2017, it had no sales but incurred $240,000 in variable manufacturing expenses and $80,000 in fixed manufacturing expenses.
-In 2018, it sold half of the finished goods inventory from 2017 for $200,000 but it had no manufacturing costs.
-In 2019, it sold the remainder of the inventory for $240,000, had no manufacturing expenses and went out of business.
-Marketing and administrative expenses were fixed and totaled $40,000 each year.
Required:
a.Prepare an income statement for each year using absorption costing.
b.Prepare an income statement for each year using variable costing.

Ireland Corporation Planned to Be in Operation for Three Years