Ans.1 | In variable costing method, the unit product cost is the sum of only variable | |||||
manufacturing costs per unit | ||||||
Unit product cost under Variable Costing: | ||||||
Direct materials | $9 | |||||
Direct labor | $4 | |||||
Variable Overhead per unit | $3 | |||||
Total production cost per unit | $16 | |||||
WHITMAN COMPANY | ||||||
Variable Costing Income Statement | ||||||
Particulars | Amount | |||||
Sales | $1,849,100 | |||||
Less: Variable cost of goods sold: | ||||||
Opening inventory | $0 | |||||
Add: Variable cost of goods manufactured (46,000 * $16) | $736,000 | |||||
Variable cost of goods available for sale | $736,000 | |||||
Less: Ending inventory [(46,000 - 41,000) * $16] | -$80,000 | |||||
Variable cost of goods sold | $656,000 | |||||
Gross Contribution Margin | $1,193,100 | |||||
Less: Variable Selling and Adm. Exp. ($4 * 41,000) | $164,000 | |||||
Contribution Margin | $1,029,100 | |||||
Less: Fixed expenses: | ||||||
Fixed manufacturing overhead | $230,000 | |||||
Fixed selling and administrative expenses | $307,500 | $537,500 | ||||
Net operating income | $491,600 | |||||
*Variable cost of goods manufactured = Units produced * Variable unit product cost | ||||||
*Variable selling and administrative expenses = Units sold * Variable selling and administrative expenses per unit sold | ||||||
Ans. 2 | Difference in profit = Absorption costing net income - Variable costing net income | |||||
$516,600 - $491,600 | ||||||
$25,000 | ||||||
There is difference of $25,000 in Net income between absorption costing and variable costing. | ||||||
The underlying reason for the difference between two methods is fixed manufacturing overhead. | ||||||
It can be calculated by the following way: | ||||||
Difference = Fixed manufacturing overhead per unit * No. of units in ending inventory | ||||||
$5 * (46,000 - 41,000) | ||||||
$5 * 5,000 | ||||||
$25,000 | ||||||
Whitman Company has just completed its first year of operations. The company's absorption costing income statement...
Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year follows: $1,685,100 Whitman Company Income Statement Sales (41,000 units X $41.10 per unit) Cost of goods sold (41,000 units x $21 per unit) Gross margin Selling and administrative expenses Net operating income 861,000 824, 100 430, 500 393.600 $ The company's selling and administrative expenses consist of $307,500 per year in fixed expenses and $3 per unit sold in variable expenses....
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 Sales (41,000 units x $41.60 per unit) Cost of goods sold (41,000 units $23 per unit) Gross margin Selling and administrative expenses Net operating income $1,705,600 943,000 762,600 471,500 $ 291, 100 The company's selling and administrative expenses consist of $307,500 per year in fixed expenses and $4 per unit sold in variable expenses. The $23...
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 Sales (41,000 units × $42.10 per unit) $ 1,726,100 Cost of goods sold (41,000 units × $21 per unit) 861,000 Gross margin 865,100 Selling and administrative expenses 512,500 Net operating income $ 352,600 The company’s selling and administrative expenses consist of $307,500 per year in fixed expenses and $5 per unit sold in variable expenses. The...
Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year appears below: Whitman Company Income Statement Sales (41,000 units * $41.10 per unit) Cost of goods sold (41,000 units * $24 per unit) $ 1,685,100 984,000 Gross margin Selling and administrative expenses 701,100 512,500 Net operating income $ 188,600 The company's selling and administrative expenses consist of $307,500 per year in fixed expenses and $5 per unit sold in variable expenses....
Whitman Company has just completed its first year of operations. The company’s absorption costing income statement for the year appears below: Whitman Company Income Statement Sales (41,000 units × $41.60 per unit) $ 1,705,600 Cost of goods sold (41,000 units × $24 per unit) 984,000 Gross margin 721,600 Selling and administrative expenses 471,500 Net operating income $ 250,100 The company’s selling and administrative expenses consist of $307,500 per year in fixed expenses and $4 per unit sold in variable expenses....
8 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 Sales (41,000 units X $40.60 per unit) Cost of goods sold (41,000 units * $21 per unit) Gross margin Selling and administrative expenses Net operating income $1,664,689 861,080 803,680 430,500 373,100 s The company's selling and administrative expenses consist of $307,500 per year in fixed expenses and $3 per unit sold in variable expenses. The...
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 Sales (41,000 units × $43.10 per unit) $ 1,767,100 Cost of goods sold (41,000 units × $25 per unit) 1,025,000 Gross margin 742,100 Selling and administrative expenses 512,500 Net operating income $ 229,600 The company’s selling and administrative expenses consist of $307,500 per year in fixed expenses and $5 per unit sold in variable expenses. The...
Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year appears below: Whitman Company Income Statement Sales (39,000 units * $42.10 per unit) Cost of goods sold (39,000 units * $22 per unit) $1,641,900 858,000 Gross margin Selling and administrative expenses 783,900 448,500 Net operating income $335,400 The company's selling and administrative expenses consist of $292,500 per year in fixed expenses and $4 per unit sold in variable expenses. The $22...
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 Sales (39,000 units X $43.60 per unit) Cost of goods sold (39,000 units X $21 per unit) Gross margin Selling and administrative expenses Net operating income $1,700,400 819,000 881,400 409,500 $ 471,900 The company's selling and administrative expenses consist of $292,500 per year in fixed expenses and $3 per unit sold in variable expenses. The $21...
Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year follows: White Company Income Statement Sales (41,000 wats X 166.60 per unit) Cost of goods sold (41.000 units X $22 per unit) Grossargin Selling and administrative expenses Het operating income $1.828,600 902.000 926,600 430.500 $496,100 The company's selling and administrative expenses consist of S307.500 per year in fixed expenses and $3 per unit sold in variable expenses. The $22 unit product...