Wilson Industries manufactures and sells a single product. The controller has prepared the following income statement for the most recent year:

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The company produced $9,000$ units and sold $8,500$ units during the year ending December $31.$ Fixed manufacturing overhead $($MOH$)$ for the year was $$144,000,$ while fixed operating expenses were $$57,00$ The company had no beginning inventory.

Read the requirements.

Requirement $1.$ Will the company's operating income under variable costing be higher, lower, or the same as its operating income under absorption costing? Why?

Wilson's operating income under variable costing will be lower than its operating income under absorption costing. This is because under absorption costing, some of the fixed MOH remains "trapped" on the balance sheet as part of the cost of inventory. Under variable costing, all fixed MOH incurred during the period is expensed as a period cost.

Requirement $2.$ Project the company's operating income under variable costing without preparing a variable costing income statement.

Begin by selecting the correct formula to reconcile the difference between the two income figures. Then enter the amounts to calculate the difference in operating income.

Change in inventory level in units $$ Fixed MOH per unit $$ Fixed MOH per unit $$ Difference in operating income $=1$

Data table

$\backslash$table$[[,$A$,,$B$],[1,$Wilson Industries$],[2,$Traditional Income Statement $($Absorption Costing$)],[3,$For the Year Ended December $31],[4,$Sales revenue,$$,510,000],[5,$Less: Cost of goods sold,,$399,500],[6,$Gross profit,$$,110,500],[7,$Less: Operating expenses,,$69,000],[8,$Operating income,$$,41,500]]$

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