Question

need help woth question part 1 & part 2

Suved Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year follows Whitman Company Inson Batent Sales (40,000 units w $42.10 per unit) Cost of goods sold (40,000 units $21 per unit) Gross margin Selling and administrative expenses Met operating income $1,604,000 840,000 0 References The company's selling and administrative expenses consist of $300,000 per year in fixed expenses and S4 per unit sold in variable expenses. The $21 unit product cost given above is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($216.000 - 54,000 units) Absorption costing unit product cost 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. Decencie any erenc Complete this question by entering your answers in the tabs below. Required 1 Required 2 Redo the company's income statement in the contribution format using variable costing Whitman Company Variable Costing Income Statement ol

Answer 1

1	Under Variable Costing
	Unit product cost:
	Direct Material	$               10
	Direct Labor	$                  4
	Variable Manufacturing overhead	$                  3
	Unit product cost	$               17
	Whitman Company
	Variable Costing Income Statement
	Sales	$ 16,84,000
	Variable expenses:
Less:	Variable Cost of goods sold (40000 X $17)	$   6,80,000
	Variable selling expenses (40000 X $4)	$   1,60,000
	Contribution margin	$   8,44,000
	Fixed Expenses:
Less:	Fixed Manufacturing overhead	$   2,16,000
	Fixed Selling and Administrative expenses	$   3,00,000
	Net operating Income	$   3,28,000
2	Variable costing net operating income (loss)	$   3,28,000
Add:	Fixed Manufacturing overhead cost deferred in (released from) inventory under absorption costing [14000 X $4]	$       56,000
	Absorption costing net operating income (loss)	$   3,84,000

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