6.value: 3.75 points Whitman Company has just completed its first year of operat
ID: 2653201 • Letter: 6
Question
6.value:
3.75 points
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 (38,000 units × $41.60 per unit) $ 1,580,800
Cost of goods sold (38,000 units × $22 per unit) 836,000
Gross margin 744,800
Selling and administrative expenses 399,000
Net operating income $ 345,800
The company’s selling and administrative expenses consist of $285,000 per year in fixed expenses and $3 per unit sold in variable expenses. The $22 per unit product cost given above is computed as follows:
Direct materials $ 11
Direct labor 4
Variable manufacturing overhead 2
Fixed manufacturing overhead ($265,000 ÷ 53,000 units) 5
Absorption costing unit product cost $ 22
Required:
1.
Prepare the company’s income statement in the contribution format using variable costing.
2.
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.
Explanation / Answer
W Company (Income statement - variable costing)
Answer 1W Company (Income statement - variable costing)
Figures in $ Particulars Units Cost per unit Amount Sales a 38000 41.6 1580800 Direct materials b 38000 11 418000 Direct labour c 38000 4 152000 Variable Manufacturing Overhead d 38000 2 76000 Variable selling and admin expense e 38000 3 114000 Contribution margin ( a -b -c -d -e) f 21.6 820800 Period cost Fixed manufacturing overhead g - 265000 Fixed Selling and admin expense h - 285000 Net operating income (f -g -h) i 270800 Answer 2 Reconciliation statement Figures in $ Particulars Amount Net operating income as per variable costing a 270800 Under recovery of fixed manufacturing overhead b 75000 5*(53000 - 38000) Net operating income as per absorption costing (a+b) 345800Related Questions
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