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 (41,000 units x $43.60 per unit) Cost of goods sold (41,000 units x $24 per unit) $1,787,600 984,000 Gross margin Selling and administrative expenses 803,600 471,500 Net operating income $ 332,100 The company's selling and administrative expenses consist of $307,500 per year in fixed expensesa per unit sold in variable expenses. The $24 per unit product cost given above is computed as follows $ 10 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($276,000 46,000 units) 6 Absorption costing unit product cost $24 Required: 1. Prepare the company's income statement in the contribution format using variable costing

Explanation / Answer

Sales 1787600 Variable expenses: Variable cost of goods sold 738000 Variable selling and administrative expenses 164000 Total Variable expenses 902000 Contribution margin 885600 Fixed expenses: Fixed manufacturing overhead 276000 Fixed selling and administrative expenses 307500 Total Fixed expenses 583500 Net operatimg income(loss) $302,100 2 Variable costing net income $302,100 Add(deduct) fixed manufacturing overhead deferred in(released) 30000 Absorption costing net operating income $332,100

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