In: Accounting
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 × $40.60 per unit) | $ | 1,542,800 |
Cost of goods sold (38,000 units × $23 per unit) | 874,000 | |
Gross margin | 668,800 | |
Selling and administrative expenses | 437,000 | |
Net operating income | $ | 231,800 |
The company’s selling and administrative expenses consist of $285,000 per year in fixed expenses and $4 per unit sold in variable expenses. The $23 per unit product cost given above is computed as follows: |
Direct materials | $ | 10 |
Direct labor | 5 | |
Variable manufacturing overhead | 3 | |
Fixed manufacturing overhead ($260,000 ÷ 52,000 units) | 5 | |
Absorption costing unit product cost | $ | 23 |
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. |
(Just need the answer, thank you.)