Question

Variable and Absorption Costing
Chandler Company sells its product for $106 per unit. Variable manufacturing costs per unit are $47, and fixed manufacturing costs at the normal operating level of 12,000 units are $240,000. Variable selling expenses are $18 per unit sold. Fixed administrative expenses total $104,000. Chandler had no beginning inventory in 2016. During 2016, the company produced 12,000 units and sold 9,000. Would net income for Chandler Company in 2016 be higher if calculated using variable costing or using absorption costing?

Calculate reported income using each method.
Do not use negative signs with any answers.

Absorption Costing Income Statement
Sales				Answer
Cost of Goods Sold:
Beginning Inventory			Answer
Variable Costs			Answer
Fixed Costs			Answer
Less: Ending Inventory			Answer
Cost of Goods Sold				Answer
AnswerContribution marginGross profitLess: Ending inventoryManufacturing costSelling expenseVariable selling expense				Answer
AnswerContribution marginGross profitLess: Ending inventoryManufacturing costSelling expenseVariable selling expense				Answer
Administrative expense				Answer
Net Income				Answer

Variable Costing Income Statement
Sales				Answer
Cost of Goods Sold:
Beginning Inventory			Answer
Variable Costs			Answer
AnswerContribution marginGross profitLess: Ending inventoryManufacturing costSelling expenseVariable selling expense			Answer
Variable cost of goods sold				Answer
AnswerContribution marginGross profitLess: Ending inventoryManufacturing costSelling expenseVariable selling expense				Answer
AnswerContribution marginGross profitLess: Ending inventoryManufacturing costSelling expenseVariable selling expense				Answer
Fixed costs:
AnswerContribution marginGross profitLess: Ending inventoryManufacturing costSelling expenseVariable selling expense			Answer
Administrative Expense			Answer
Total Fixed Cost				Answer
Net Income				Answer

Answer 1