Question

apter 6 Saved 4 Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year follows: Whitman Company Income Statement nts Sales (39,000 units x $42.10 per unit) Cost of goods sold (39,000 units x $25 per unit) Gross margin Selling and administrative expenses Net operating income $1,641,900 975,000 666,900 487,500 elook $ 179,400 Hint The company's selling and administrative expenses consist of $292,500 per year in fixed expenses and $5 per unit sold in variable expenses. The $25 unit product cost given above is computed as follows: Print $18 Direct materials Direct labor ferences Variable manufacturing overhead Fixed manufacturing overhead ($306,000 51,800 units) Absorption costing unit product cost 6 $25 Required: 1. Redo the company's income statement in the contribution format using variable costing. 2. Reconcile any difference between the net operating income on your variable costing income statement and the net operating income on the absorption costing income statement above. Complete this

Answer 1

1) Income statement
sales					1641900
less: variable expenses
variable cost of goods sold (39000*19)				741000
variable selling & administrative exp (487500-292500)				195000
total variable expense					936000
contribution margin					705900
fixed expenses:
fixed manufacturing overhead				306000
fixed selling & adm expenses				292500
total fixed cost					598500
net operating income (loss)					107400
2) reconcilation
net income -variable costing				107400
add: fixed manufacturing overhead deffered in inventory				72000
(51000-39000)*6
net income-absorption costing				179400
** variable cost of goods sold = (10+5+4) =19

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