The VARCOST2 worksheet is capable of calculating variable and absorption income when unit sales are equal to or less than production. An equally common situation (that this worksheet cannot handle) is when beginning inventory is present and sales volume exceeds production volume. Revise the worksheet Data Section to include:

Beginning inventory in units 15,000

Beginning inventory cost (absorption) $266,875

Beginning inventory cost (variable) $210,000,

Also, change actual production to 70,000. Revise the Answer Section to accommodate this new data. Assume that Anderjak uses the weighted-average costing method for inventory. Preview the printout to make sure that the worksheet will print neatly on one page, and then print the worksheet. Check figure: Absorption income, $670,000.

VARCOST Variable Costing Data Section Actual production in units Sales in units Sales price per unit Variable manufacturing costs per unit Variable selling costs per unit Fixed manufacturing costs Fixed selling expenses 100,000 80,000 $30 $14 $2 $315,000 $100,000 Answer Section Income statement: Absorption costing $2,400,000 $1,400,000 315,000 $1,715,000 343,000 Sales Cost of goods sold: Variable manufacturing costs Fixed manufacturing costs Total goods available for sale Less ending inventory Cost of goods sold Gross profit Selling expenses: Fixed selling expenses Variable selling expenses Total selling expenses Operating income 1.372.000 $1,028,000 $100,000 160,000 260,000 $768,000 Income statement: Variable costing $2,400,000 $1,400,000 280,000 Sales Cost of goods sold: Variable manufacturing costs Less ending inventory Variable cost of goods sold Manufacturing margin Variable selling expenses Contribution margin Fixed costs: Fixed manufacturing costs Fixed selling expenses Total fixed costs Operating income 1,120,000 $1,280,000 160,000 $1,120,000 $315,000 100,000 415,000 $705,000