Question

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 per unit product cost given above is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($192,000 - 48,000 units) wu Absorption costing unit product cost

Answer 1

1641900 Requirement: 1 White man company Variable costing income statement Sales ( 39,000* $42.10 Per unit) Variable Expense Variable cost of goods sold (@18) Variable Selling and Administrative Expense (@4) Total Varible Expenses Contribution Margin Fixed Expenses : Fixed manufacturing Overheads Fixed Sellingand Administrative Expenses Total fixed Expenses 702000 156000 858000 783900 192000 292500 4845001 299400 Net Operating Income

Requirement: 2 Reconcile the variable costing and absorption costing Net operating income Variable Costing Net Operating Income 299400 Add(Deduct) Fixed Manufacturing Overheads cost Deferred in (released From) inventory 36,000 Absorption Costing Net Operating Income or loss 335400