WATERWAYCORPORATION Income Statement For the Month of November (in thousands) Sales $3,400 Less variable cost of goods sold 1,700 Contribution margin 1,700 Less fixed manufacturing costs at budget 600 Gross margin 1,100 Less fixed selling and administrative costs 400 Net income before taxes $700 The controller attached the following notes with the statements: 1. The unit sales price for November averaged $34. 2. The unit manufacturing costs for the month were as follows: Variable costs $17 Fixed costs applied 4 Total cost $21 3. The unit rate for fixed manufacturing costs is a predetermined rate based on a monthly production of 150,000 units. 4. The variable costs per unit have been stable all year. 5. Production for November was 43,850 units in excess of sales. 6. The inventory at November 30 was 90,400 units. (a) The vice-president, sales is not comfortable with the variable-costing system and wonders what the net income would have been under the previous absorption-costing system. 1. Present the November income statement on an absorption-costing basis. WATERWAYCORPORATION Absorption-Costing Income Statement Sales in units 2. Reconcile and explain the difference between the variable-costing and absorption-costing net income figures. Variable-costing net income $ FMOH deferred in ending inventory FMOH released from beginning inventory Absorption-costing net income ta $