Question

Review your results from Problem P23-­28A. Moss’s standard and actual sales price per mug is $3. Prepare the standard cost income statement for July 2018.

Short answer

Operating income = $24,420

Step-by-step solution

Meaning of Standard cost income statement

An organization that uses standard cost bookkeeping, an accounting technique that bases costs on standard costs rather than actual costs, is required to publish income statements on a regular basis, just like any other trade.

Preparing Standard cost income statement

Moss Standard cost income statement For the Month Ended July 31, 2018
Sales Revenue at standard ($3/mug × 62,500 mugs)	$187,500
Cost of Goods Sold at standard (from P23-33B) $59,375
Manufacturing Cost Variances (from P23-33B):
Direct Materials Cost Variance $(880)
Direct Materials Efficiency Variance (375)
Direct Labor Cost Variance 3,940
Direct Labor Efficiency Variance 1,045
Variable Overhead Cost Variance (985)
Variable Overhead Efficiency Variance 570
Fixed Overhead Cost Variance 6,443
Fixed Overhead Volume Variance (1,053)
Total Manufacturing Variances 8,705
Cost of Goods Sold at actual	68,080
Gross Profit	119,420
Selling and Administrative Expenses	95,000
Operating Income	$24,420