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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
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 units times $ per unit $
Cost of goods sold units times $ per unit
Gross margin
Selling and administrative expenses
Net operating income $
The companys selling and administrative expenses consist of $ per year in fixed expenses and $ per unit sold in variable expenses. The $ unit product cost given above is computed as follows:
Direct materials $
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead $: units
Absorption costing unit product cost $
Required:
Redo the companys income statement in the contribution format using variable costing.
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.
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