Whitman Company has just completed its first year of operations. The company\'s

Question

Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year appears below Whitman Company Income Statement Sales (40,000 units x $45.1 per unit) $1,804,000 Cost of goods sold (40,000 units x $23 per unit) 920,000 Gross margin Selling and administrative expenses Net operating income 884,000 500,000 $384,000 The company's selling and administrative expenses consist of $300,000 per year in fixed expenses and $5 per unit sold in variable expenses. The $23 per unit product cost given above is computed as follows: $10 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($216,000 Absorption costing unit product cost 4 54,000 units) 4 $23

Explanation / Answer

2

Sales 1804000 Variable Expense Variable Cost of Goods sold (10+5+4)*40000 760000 Selling and Admin Expense 200000 960000 Contrbution Margin 844000 Fixed Expense Fixed manufacturing Overhead 216000 Selling and Admin Expense 300000 516000 Net Operating Income 328000

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