(TCO E) Topple Company produces a single product. Operating data for the company
ID: 2387882 • Letter: #
Question
(TCO E) Topple Company produces a single product. Operating data for the company and its absorption costing income statement for the last year is presented below:Units in beginning inventory... 0
Units produced ....9,000
Units sold .......7,000
Sales..... $100,000
Less cost of goods sold:
Beginning inventory 0
Add cost of goods manufactured .....54,000
Goods available for sale..... 54,000
Less ending inventory.... 12,000
Cost of goods sold ....42,000
Gross margin.... 58,000
Less selling & admin. expenses ...28,000
Net operating income.. $30,000
Variable manufacturing costs are $4 per unit. Fixed factory overhead totals $18,000 for the year. This overhead was applied at a rate of $2 per unit. Variable selling and administrative expenses were $1 per unit sold.
Required: Prepare a new income statement for the year using variable costing. Comment on the differences between the absorption costing and the variable costing income statements
Explanation / Answer
Sales
80,000
Less : Variable Cost of Goods Sold
Opening Inventory
0
Cost of Goods Manufactured
9,000 X $4
36,000
Goods Available For Sale
36,000
Less : Closing Inventory
1,000 X $4
(4,000)
(32,000)
Contribution
48,000
Less : Variable Selling & Admin Cost
8,000 X 1
(8,000)
40,000
Less Fixed Expenses
Fixed Factory OHD
(18,000)
Fixed Selling & Admin Cost
28,000 – 8,000
(20,000)
Net Operating Income
2,000
Sales
80,000
Less : Variable Cost of Goods Sold
Opening Inventory
0
Cost of Goods Manufactured
9,000 X $4
36,000
Goods Available For Sale
36,000
Less : Closing Inventory
1,000 X $4
(4,000)
(32,000)
Contribution
48,000
Less : Variable Selling & Admin Cost
8,000 X 1
(8,000)
40,000
Less Fixed Expenses
Fixed Factory OHD
(18,000)
Fixed Selling & Admin Cost
28,000 – 8,000
(20,000)
Net Operating Income
2,000
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