Question

Requirea: 1. Prepare the company's income statement in the contribution format using variable costing. Whitman Company Variable Costing Income Statement Sales $ 875,000 Variable expenses: 875,000 Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative 160,000 210,000 Fixed selling and administrative 370,000 505,000 Net operating income $ 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. Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Variable costing net operating income | $ ............................................................. 15,000 20,000 35,000 Absorption costing net operating income

Answer 1

875000 420000 70000 Requirement: 1 White man company Variable costing income statement Sales ( 35,000* $25 Per unit) Variable Expense Variable cost of goods sold (@12) Variable Selling and Administrative Expense (@2) Total Varible Expenses Contribution Margin Fixed Expenses : Fixed manufacturing Overheads Fixed Sellingand Administrative Expenses Total fixed Expenses Net Operating Income 490000 385000 160000 210000 370000 15000

Requirement: 2 Reconcile the variable costing and absorption costing Net operating income Variable Costing Net Operating Income 15000 Add(Deduct) Fixed Manufacturing Overheads cost Deferred in (released From) inventory 20,000 Absorption Costing Net Operating Income or loss 35000