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. The $24 per unit product cost given above is computed as follows:
Direct materials $ 12
Direct labor 5
Variable manufacturing overhead 3
Fixed manufacturing overhead ($220,000 ÷ 55,000 units) 4
Absorption costing unit product cost $ 24 Required:
1. Prepare 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.
Whitman Company | ||
Variable Costing Income Statement | ||
Sales | 1705600 | |
Variable Expenses: | ||
Cost of Goods Sold [(12 + 5 + 3) x 41,000] | 820000 | |
Selling and Administrative Expenses (4 x 41,000) | 164000 | 984000 |
Contribution Margin | 721600 | |
Fixed Costs: | ||
Manufacturing overhead | 220000 | |
Selling and Administrative Expenses | 307500 | 527500 |
Net Operating Income | 194100 | |
Reconciliation of Variable Costing and Absorption Costing Net Operating Income | ||
Variable costing net operating income (loss) | 194100 | |
Fixed manufacturing overhead deferred in ending inventory | 56000 | |
Absorption costing net operating income (loss) | 250100 | |
Notes: | ||
Number of units produced | 55000 | |
Less: Units sold | 41000 | |
Units in ending inventory | 14000 | |
Fixed manufacturing overhead per unit | 4 | |
Fixed manufacturing overhead deferred | 56000 |
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: 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 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 (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 follows: Whitman Company Income Statement Sales (41,000 units x $45.10 per unit) Cost of goods sold (41,000 units x $21 per unit) Gross margin Selling and administrative expenses Net operating income $1,849,100 861,000 9BB, 100 471,500 $ 516,600 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...
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 × $41.10 per unit) $ 1,602,900 Cost of goods sold (39,000 units × $24 per unit) 936,000 Gross margin 666,900 Selling and administrative expenses 487,500 Net operating income $ 179,400 The company’s selling and administrative expenses consist of $292,500 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 follows: Whitman Company Income Statement Sales (40,000 units × $44.10 per unit) $ 1,764,000 Cost of goods sold (40,000 units × $24 per unit) 960,000 Gross margin 804,000 Selling and administrative expenses 420,000 Net operating income $ 384,000 The company’s selling and administrative expenses consist of $300,000 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 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...
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 (39,000 units × $45.10 per unit) $ 1,758,900 Cost of goods sold (39,000 units × $22 per unit) 858,000 Gross margin 900,900 Selling and administrative expenses 448,500 Net operating income $ 452,400 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...