Question

Chandler Company sells its product for $104 per unit. Variable manufacturing costs per unit are $45, and fixed manufacturing costs at the normal operating level of 12,000 units are $240,000. Variable selling expenses are $15 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 1

ABSORPTION COSTIN INCOME STATEMENT
Sales (9000 units @104)				936000
Cost of goods sold:
Beginning Inventory			0
Variable ccost (12000*45)			540000
Fixed cost			240000
Less: Ending inventory			195000
Cost of goods sold:				585000
Gross Profit				351000
Selling expense (9000 units @15)				135000
Admin expense				104000
Net inccome				112000
Note: Cost per unit for ending inventory:
Variable cost:			45
Fixed cost (240000/12000)			20
Unit cost			65
Number of units of Ending inventory			3000
Ending inventory			195000
VARIABLE C OSTING INCOME STATEMENT
sales revenue				936000
Cost of g oods sold:
Begning inventory			0
Variable cost			540000
Ending Inventory			135000
Vvariable c ost of goods sold				405000
Variable selling expense				135000
Conribution margin				396000
fixed cost:
Fixed Manufacturing OH				240000
Fixed Admin oh				104000
Net income				52000
Note: Ending Inventory is valued at variable cost only i.e. 3000 units @45= $ 135000