Homework Answers
Variable production cost per unit for year 2 = 66000/1200 = 55 per unit
Fixed manufacturing cost per unit = 20000/1000 = 20 per unit
Ending inventory for year 2 using absorption costing = 400*75 = 30000
So answer is b) $30000
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$
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Gross margin
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Net operating
income
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the company produced 100,000 units and sold 80,000 units. The
absorption costing income statement for this year follows.
Sales (80,000 units × $40 per unit)
$
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Cost of goods sold
Beginning inventory
$
0
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2,000,000
Cost of goods available for sale
2,000,000
Ending inventory (20,000 × $20)
400,000
Cost of goods sold
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Gross margin
1,600,000
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The company’s absorption costing income statement for the year
appears below:
Whitman Company
Income Statement
Sales (42,000 units
× $41.10 per unit)
$
1,726,200
Cost of goods sold
(42,000 units × $21 per unit)
882,000
Gross margin
844,200
Selling and
administrative expenses
525,000
Net operating
income
$
319,200
The company’s selling and administrative expenses consist of
$315,000 per year in fixed expenses and $5 per unit sold in...
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