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 (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 expenses. The $23 per unit product cost given above is computed as follows:

  

Direct materials $ 11
Direct labor 5
Variable manufacturing overhead 3
Fixed manufacturing overhead ($200,000 ÷ 50,000 units) 4
Absorption costing unit product cost $ 23

Required:

1. Prepare the company’s income statement in the contribution format using variable costing.

Whitman Company
Variable Costing Income Statement
Variable expenses:
Fixed expenses:

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.

Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes (losses)
Variable costing net operating income (loss)
Absorption costing net operating income (loss)

Solutions

Expert Solution


Related 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 (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...
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...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT