Chandler Company sells its product for $104 per unit. Variable manufacturing cos

Question

Chandler Company sells its product for $104 per unit. Variable manufacturing costs per unit are $45, and fixed manufacturing costs at the normal operating level of 12,000 units are $240,000. Variable selling expenses are $15 per unit sold. Fixed administrative expenses total $104,000. Chandler had no beginning inventory in 2016. During 2016, the company produced 12,000 units and sold 9,000. Would net income for Chandler Company in 2016 be higher if calculated using variable costing or using absorption costing?

Calculate reported income using each method.
Do not use negative signs with any answers.

Absorption Costing Income Statement Sales $Answer Cost of Goods Sold: Beginning Inventory Answer Variable Costs Answer Fixed Costs Answer Less: Ending Inventory Answer Cost of Goods Sold Answer AnswerContribution marginGross profitLess: Ending inventoryManufacturing costSelling expenseVariable selling expense Answer AnswerContribution marginGross profitLess: Ending inventoryManufacturing costSelling expenseVariable selling expense Answer Administrative expense Answer Net Income $Answer

Explanation / Answer

ABSORPTION COSTIN INCOME STATEMENT Sales (9000 units @104) 936000 Cost of goods sold: Beginning Inventory 0 Variable ccost (12000*45) 540000 Fixed cost 240000 Less: Ending inventory 195000 Cost of goods sold: 585000 Gross Profit 351000 Selling expense (9000 units @15) 135000 Admin expense 104000 Net inccome 112000 Note: Cost per unit for ending inventory: Variable cost: 45 Fixed cost (240000/12000) 20 Unit cost 65 Number of units of Ending inventory 3000 Ending inventory 195000 VARIABLE C OSTING INCOME STATEMENT sales revenue 936000 Cost of g oods sold: Begning inventory 0 Variable cost 540000 Ending Inventory 135000 Vvariable c ost of goods sold 405000 Variable selling expense 135000 Conribution margin 396000 fixed cost: Fixed Manufacturing OH 240000 Fixed Admin oh 104000 Net income 52000 Note: Ending Inventory is valued at variable cost only i.e. 3000 units @45= $ 135000

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