Assume that there were $ 4,024 million fixed manufacturing costs and $ 930 million fixed selling, administrative,

Question:

Assume that there were $ 4,024 million fixed manufacturing costs and $ 930 million fixed selling, administrative, and other costs for the year.

(in millions)

Net sales ...................$18,666

Cost of goods sold ...............$16,089

Selling, administrative, and other expenses........ 1,621

Total expenses.................$17,710

Income from operations..............$ 956

The finished goods inventories at the beginning and end of the year from the balance sheet were as follows:

January 1 ..........$ 2,792 million

December 31 ........$ 2,354 million

Assume that 30% of the beginning and ending inventory consists of fixed costs. Assume work in process and materials inventory were unchanged during the period.

a. Prepare an income statement according to the variable costing concept for Whirlpool Corporation for the recent year.

b. Explain the difference between the amount of income from operations reported under the absorption costing and variable costing concepts. Variable and absorption costing—three products

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