Question
In: Accounting
Whitman Company has just completed its first year of operations. The company’s absorption costing income statement...
|
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 (39,000 units × $42.10 per unit) | $ | 1,641,900 |
| Cost of goods sold (39,000 units × $26 per unit) | 1,014,000 | |
| Gross margin | 627,900 | |
| Selling and administrative expenses | 487,500 | |
| Net operating income | $ | 140,400 |
|
The company’s selling and administrative expenses consist of $292,500 per year in fixed expenses and $5 per unit sold in variable expenses. The $26 per unit product cost given above is computed as follows: |
| Direct materials | $ | 11 |
| Direct labor | 5 | |
| Variable manufacturing overhead | 4 | |
| Fixed manufacturing overhead ($324,000 ÷ 54,000 units) | 6 | |
| Absorption costing unit product cost | $ | 26 |
| 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. |
Solutions
Expert Solution
1) Whitman Company
Contribution Format Income Statement (Amounts in $)
| Sales (39,000 units*$42.10 per unit) | 1,641,900 | |
| Less: Variable costs | ||
| Direct materials (39,000 units*$11) | 429,000 | |
| Direct labor (39,000 units*$5) | 195,000 | |
| Variable manufacturing overhead (39,000 units*$4) | 156,000 | |
| Variable selling and administrative exp (39,000*$5) | 195,000 | |
| Total variable costs | (975,000) | |
| Contribution Margin | 666,900 | |
| Less: Fixed costs | ||
| Fixed manufacturing overhead | 324,000 | |
| Fixed selling and administrative exp | 292,500 | |
| Total Fixed costs | (616,500) | |
| Net Operating Income | 50,400 |
2) Units produced = 54,000 units
Units sold = 39,000 units
Ending inventory in units = 54,000 - 39,000 = 15,000 units
Reconciliation Statement (Amounts in $)
| Net operating income as per variable costing | 50,400 |
| Add: Fixed manufacturing overhead deferred in ending inventory under absorption costing [($324,000/54,000 units)*15,000 units] | 90,000 |
| Net operating income as per absorption costing | 140,400 |
ekkarill92 answered 1 year agoRelated Solutions
Whitman Company has just completed its first year of operations. The company’s absorption costing income statement...
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 × $44.60 per unit)
$
1,828,600
Cost of goods sold (41,000 units × $20 per unit)
820,000
Gross margin
1,008,600
Selling and administrative expenses
471,500
Net operating income
$
537,100
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...
Whitman Company has just completed its first year of operations. The company’s absorption costing income statement...
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 (42,000 units × $44.60 per unit)
$
1,873,200
Cost of goods
sold (42,000 units × $24 per unit)
1,008,000
Gross
margin
865,200
Selling and
administrative expenses
483,000
Net operating
income
$
382,200
The company’s selling
and administrative expenses consist of $315,000 per year in fixed
expenses and $4 per unit sold in variable...
Whitman Company has just completed its first year of operations. The company’s absorption costing income statement...
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 (38,000
units × $41.60 per unit)
$
1,580,800
Cost of goods
sold (38,000 units × $24 per unit)
912,000
Gross
margin
668,800
Selling and
administrative expenses
475,000
Net operating
income
$
193,800
The company’s selling
and administrative expenses consist of $285,000 per year in fixed
expenses and $5 per unit sold in variable expenses. The...
Whitman Company has just completed its first year of operations. The company’s absorption costing income statement...
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 × $42.10 per unit)
$
1,768,200
Cost of goods sold (42,000 units × $23 per unit)
966,000
Gross margin
802,200
Selling and administrative expenses
483,000
Net operating income
$
319,200
The company’s selling and administrative expenses consist of
$315,000 per year in fixed expenses and $4 per unit sold in
variable expenses. The...
Whitman Company has just completed its first year of operations. The company’s absorption costing income statement...
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 (39,000
units × $44.60 per unit)
$
1,739,400
Cost of goods
sold (39,000 units × $23 per unit)
897,000
Gross
margin
842,400
Selling and
administrative expenses
448,500
Net operating
income
$
393,900
The company’s selling and administrative expenses consist of
$292,500 per year in fixed expenses and $4 per unit sold in
variable expenses. The...
Whitman Company has just completed its first year of operations. The company’s absorption costing income statement...
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
× $41.10 per unit)
$
1,561,800
Cost of goods sold (38,000 units
× $23 per unit)
874,000
Gross margin
687,800
Selling and administrative
expenses
437,000
Net operating income
$
250,800
The company’s selling and administrative expenses consist of
$285,000 per year in fixed expenses and $4 per unit sold in
variable...
Whitman Company has just completed its first year of operations. The company’s absorption costing income statement...
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 × $40.10 per
unit)
$
1,684,200
Cost of goods sold (42,000 units
× $23 per unit)
966,000
Gross margin
718,200
Selling and administrative
expenses
483,000
Net operating income
$
235,200
The company’s selling and administrative expenses consist of
$315,000 per year in fixed expenses and $4 per unit sold in
variable expenses. The...
Whitman Company has just completed its first year of operations. The company’s absorption costing income statement...
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 (38,000 units × $40.10 per
unit)
$
1,523,800
Cost of goods sold (38,000 units
× $24 per unit)
912,000
Gross margin
611,800
Selling and administrative
expenses
437,000
Net operating income
$
174,800
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...
Whitman Company has just completed its first year of operations. The company’s absorption costing income statement...
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...
Whitman Company has just completed its first year of operations. The company’s absorption costing income statement...
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 × $43.10 per unit)
$
1,767,100
Cost of goods
sold (41,000 units × $23 per unit)
943,000
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
expenses and $4 per unit sold in variable expenses. The...
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