Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Whitman Company has just completed its first year of operations. The companys absorption costing income statement for the year follows: Whitman Company Income Statement Sales

Whitman Company has just completed its first year of operations. The companys absorption costing income statement for the year follows:

Whitman Company Income Statement
Sales (42,000 units $40.60 per unit) $ 1,705,200
Cost of goods sold (42,000 units $24 per unit) 1,008,000
Gross margin 697,200
Selling and administrative expenses 525,000
Net operating income $ 172,200

The companys selling and administrative expenses consist of $315,000 per year in fixed expenses and $5 per unit sold in variable expenses. The $24 unit product cost given above is computed as follows:

Direct materials $ 11
Direct labor 4
Variable manufacturing overhead 4
Fixed manufacturing overhead ($265,000 53,000 units) 5
Absorption costing unit product cost $ 24

Required:

1. Redo the companys 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 above.

Required 1.

Redo the companys income statement in the contribution format using variable costing.

Whitman Company
Variable Costing Income Statement

Required 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 above. (Enter any losses or deductions as a negative value.)

Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes
Variable costing net operating income
Absorption costing net operating income

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Advanced Quality Auditing

Authors: Lance B. Coleman

1st Edition

087389913X, 978-0873899130

More Books

Students also viewed these Accounting questions