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Whitman Company Variable Costing Income Statement Sales $ 1,694,800 Variable expenses: Variable cost of goods sold $ 570,000 Variable selling and administrative expenses 228,000 X
Whitman Company Variable Costing Income Statement Sales $ 1,694,800 Variable expenses: Variable cost of goods sold $ 570,000 Variable selling and administrative expenses 228,000 X 798,000 896,800 Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative expenses 276,000 285,000 561,000 Net operating income $ 335,800 Whitman Company has just completed its first year of operations. The company's absorption cost statement for the year follows: June Sherpa (Sophmore.... Whitman Company Income Statement Sales (38,000 units x $44.60 per unit) Cost of goods sold (38,000 units $21 per unit) Gross margin Selling and administrative expenses Net operating income $1,694,800 798,000 896,800 399,000 $ 497,800 The company's selling and administrative expenses consist of $285,000 per year in fixed expenses and $3 per unit sold in variable expenses. The $21 unit product cost given above is computed as follows: $ 9 4 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($276,000 = 46,000 units) 2 6 The company's selling and administrative expenses consist of $285,000 per year in fixed expenses and $3 per unit sold in variable expenses. The $21 unit product cost given above is computed as follows: $ Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($276,000 = 46,000 units) Absorption costing unit product cost 9 4 2 6 $ 21 Required: 1. Redo the company's 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. Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Variable costing net operating income $ 311,800 X Add: Fixed manufacturing overhead cost deferred in inventory under absorption costing 24,000 X Absorption costing net operating income $ 335,800 X
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