Whitman Company has just completed its first year of operations. The company’s a
ID: 2393616 • Letter: W
Question
Whitman Company has just completed its first year of operations. The company’s absorption costing income statement for the year appears below:
The company’s selling and administrative expenses consist of $292,500 per year in fixed expenses and $5 per unit sold in variable expenses. The $26 per unit product cost given above is computed as follows:
Prepare the company’s 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.
Whitman Company has just completed its first year of operations. The company’s absorption costing income statement for the year appears below:
Explanation / Answer
1) Whitman Company
Contribution Format Income Statement (Amounts in $)
2) Units produced = 54,000 units
Units sold = 39,000 units
Ending inventory in units = 54,000 - 39,000 = 15,000 units
Reconciliation Statement (Amounts in $)
Sales (39,000 units*$42.10 per unit) 1,641,900 Less: Variable costs Direct materials (39,000 units*$11) 429,000 Direct labor (39,000 units*$5) 195,000 Variable manufacturing overhead (39,000 units*$4) 156,000 Variable selling and administrative exp (39,000*$5) 195,000 Total variable costs (975,000) Contribution Margin 666,900 Less: Fixed costs Fixed manufacturing overhead 324,000 Fixed selling and administrative exp 292,500 Total Fixed costs (616,500) Net Operating Income 50,400Related Questions
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