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Exercise 6-12 (Algo) Variable Costing Income Statement; Reconciliation [LO6-2, LO6-3] Whitman Company has just completed its...
Exercise 6-12 (Algo) Variable Costing Income Statement; Reconciliation [LO6-2, LO6-3]
Whitman Company has just completed its first year of operations. The company’s absorption costing income statement for the year follows:
| Whitman Company Income Statement |
||
| Sales (41,000 units × $44.10 per unit) | $ | 1,808,100 |
| Cost of goods sold (41,000 units × $25 per unit) | 1,025,000 | |
| Gross margin | 783,100 | |
| Selling and administrative expenses | 471,500 | |
| Net operating income | $ | 311,600 |
The company’s selling and administrative expenses consist of $307,500 per year in fixed expenses and $4 per unit sold in variable expenses. The $25 unit product cost given above is computed as follows:
| Direct materials | $ | 12 |
| Direct labor | 4 | |
| Variable manufacturing overhead | 3 | |
| Fixed manufacturing overhead ($330,000 ÷ 55,000 units) | 6 | |
| Absorption costing unit product cost | $ | 25 |
Required:
1. Redo 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 above.
Solutions
ekkarill92 answered 2 years agoRelated Solutions
Exercise 6-12 (Algo) Variable Costing Income Statement; Reconciliation [LO6-2, LO6-3] Whitman Company has just completed its...
Exercise 6-12 (Algo) Variable Costing Income Statement;
Reconciliation [LO6-2, LO6-3]
Whitman Company has just completed its first year of operations.
The company’s absorption costing income statement for the year
follows:
Whitman Company
Income Statement
Sales (41,000 units × $41.10 per unit)
$
1,685,100
Cost of goods sold (41,000 units × $21 per unit)
861,000
Gross margin
824,100
Selling and administrative expenses
471,500
Net operating income
$
352,600
The company’s selling and administrative expenses consist of
$307,500 per year in fixed...
Exercise 6-12 Variable Costing Income Statement; Reconciliation [LO6-2, LO6-3] Whitman Company has just completed its first...
Exercise 6-12 Variable Costing Income Statement; Reconciliation
[LO6-2, LO6-3]
Whitman Company has just completed its first year of operations.
The company’s absorption costing income statement for the year
follows:
Whitman Company
Income Statement
Sales (42,000 units × $40.60 per
unit)
$
1,705,200
Cost of goods sold (42,000 units
× $22 per unit)
924,000
Gross margin
781,200
Selling and administrative
expenses
441,000
Net operating income
$
340,200
The company’s selling and administrative expenses consist of
$315,000 per year in fixed expenses...
Problem 6-19 (Algo) Variable Costing Income Statement; Reconciliation [LO,6-1, LO6-2, LO6-3] During Heaton Company’s first two...
Problem 6-19 (Algo) Variable Costing Income Statement;
Reconciliation [LO,6-1, LO6-2, LO6-3]
During Heaton Company’s first two years of operations, it
reported absorption costing net operating income as follows:
Year 1
Year 2
Sales (@ $63 per
unit)
$
1,134,000
$
1,764,000
Cost of goods
sold (@ $27 per unit)
486,000
756,000
Gross
margin
648,000
1,008,000
Selling and
administrative expenses*
304,000
334,000
Net operating
income
$
344,000
$
674,000
* $3 per unit variable; $250,000 fixed each year.
The company’s $27...
Exercise 6-2 (Algo) Variable Costing Income Statement; Explanation of Difference in Net Operating Income [LO6-2] Ida...
Exercise 6-2 (Algo) Variable Costing Income Statement;
Explanation of Difference in Net Operating Income [LO6-2]
Ida Company produces a handcrafted musical instrument called a
gamelan that is similar to a xylophone. The gamelans are sold for
$980. Selected data for the company’s operations last year
follow:
Units in beginning inventory
0
Units produced
240
Units sold
225
Units in ending inventory
15
Variable costs per unit:
Direct materials
$
140
Direct labor
$
360
Variable manufacturing overhead
$
35
Variable...
Exercise 6-3 (Algo) Reconciliation of Absorption and Variable Costing Net Operating Incomes [LO6-3] [The following information...
Exercise 6-3 (Algo) Reconciliation of Absorption and Variable
Costing Net Operating Incomes [LO6-3]
[The following information applies to the questions
displayed below.]
Jorgansen Lighting, Inc., manufactures heavy-duty street
lighting systems for municipalities. The company uses variable
costing for internal management reports and absorption costing for
external reports to shareholders, creditors, and the government.
The company has provided the following data:
Year 1
Year 2
Year 3
Inventories
Beginning (units)
220
150
180
Ending (units)
150
180
230
Variable costing net...
Exercise 6-9 (Algo) Variable and Absorption Costing Unit Product Costs and Income Statements [LO6-1, LO6-2, LO6-3]...
Exercise 6-9 (Algo) Variable and Absorption Costing Unit Product
Costs and Income Statements [LO6-1, LO6-2, LO6-3]
Walsh Company manufactures and sells one product. The following
information pertains to each of the company’s first two years of
operations:
Variable costs per unit:
Manufacturing:
Direct materials
$
23
Direct labor
$
16
Variable manufacturing overhead
$
4
Variable selling and administrative
$
3
Fixed costs per year:
Fixed manufacturing overhead
$
240,000
Fixed selling and administrative expenses
$
90,000
During its first...
Exercise 6-9 (Algo) Variable and Absorption Costing Unit Product Costs and Income Statements [LO6-1, LO6-2, LO6-3]...
Exercise 6-9 (Algo) Variable and Absorption Costing Unit Product
Costs and Income Statements [LO6-1, LO6-2, LO6-3]
Walsh Company manufactures and sells one product. The following
information pertains to each of the company’s first two years of
operations:
Variable costs per unit:
Manufacturing:
Direct materials
$
22
Direct labor
$
14
Variable manufacturing overhead
$
4
Variable selling and administrative
$
3
Fixed costs per year:
Fixed manufacturing overhead
$
400,000
Fixed selling and administrative expenses
$
70,000
During its first...
Exercise 6-9 (Algo) Variable and Absorption Costing Unit Product Costs and Income Statements [LO6-1, LO6-2, LO6-3]...
Exercise 6-9 (Algo) Variable and Absorption Costing Unit Product
Costs and Income Statements [LO6-1, LO6-2, LO6-3]
Walsh Company manufactures and sells one product. The following
information pertains to each of the company’s first two years of
operations:
Variable costs per unit:
Manufacturing:
Direct materials
$
25
Direct labor
$
17
Variable manufacturing overhead
$
2
Variable selling and administrative
$
1
Fixed costs per year:
Fixed manufacturing overhead
$
400,000
Fixed selling and administrative expenses
$
80,000
During its first...
Problem 6-22 (Static) Variable Costing Income Statements; Income Reconciliation [LO6-1, LO6-2, LO6-3] Denton Company manufactures and...
Problem 6-22 (Static) Variable Costing Income Statements; Income
Reconciliation [LO6-1, LO6-2, LO6-3]
Denton Company manufactures and sells a single product. Cost
data for the product are given:
Variable costs per unit:
Direct materials
$
7
Direct labor
10
Variable manufacturing overhead
5
Variable selling and administrative
3
Total variable cost per unit
$
25
Fixed costs per month:
Fixed manufacturing overhead
$
315,000
Fixed selling and administrative
245,000
Total fixed cost per month
$
560,000
The product sells for $60...
Problem 6-22 (Static) Variable Costing Income Statements; Income Reconciliation [LO6-1, LO6-2, LO6-3] Denton Company manufactures and...
Problem 6-22 (Static) Variable Costing Income Statements; Income
Reconciliation [LO6-1, LO6-2, LO6-3]
Denton Company manufactures and sells a single product. Cost
data for the product are given:
Variable costs per unit:
Direct materials
$
7
Direct labor
10
Variable manufacturing overhead
5
Variable selling and administrative
3
Total variable cost per unit
$
25
Fixed costs per month:
Fixed manufacturing overhead
$
315,000
Fixed selling and administrative
245,000
Total fixed cost per month
$
560,000
The product sells for $60...
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