Question

Variable Costing Income Statement

On November 30, the end of the first month of operations, Weatherford Company prepared the following income statement, based on the absorption costing concept:

Weatherford Company Absorption Costing Income Statement For the Month Ended November 30
Sales (2,500 units)			$52,500
Cost of goods sold:
Cost of goods manufactured (2,900 units)	$43,500
Inventory, November 30 (400 units)	(6,000)
Total cost of goods sold			37,500
Gross profit			$15,000
Selling and administrative expenses			8,530
Income from operations			$6,470

Assume the fixed manufacturing costs were $9,135 and the fixed selling and administrative expenses were $4,180.

Prepare an income statement according to the variable costing concept. Round all final answers to whole dollars.

Weatherford Company
Variable Costing Income Statement
For the Month Ended November 30
Sales		$
Variable cost of goods sold:
Variable cost of goods manufactured	$
Inventory, November 30
Total variable cost of goods sold
Manufacturing margin		$
Variable selling and administrative expenses
Contribution margin		$
Fixed costs:
Fixed manufacturing costs	$
Fixed selling and administrative expenses
Total fixed costs
Income from operations		$

Answer 1

Answer:

Variable costing Income statement
For the month ended November 30
Sales		$52,500
Variable cost of goods sold:
Variable cost of goods manufactured	34,365		(43,500-9,135)
Inventory, November 30	(4,740)		(43,500-9,135)/2,900*400
Total Variable cost of goods sold		29,625
Manufacturing margin		22,875
Variable selling and administrative expenses		(4,350)	=8,530-4,180
Contribution margin		18,525
Fixed costs:
Fixed manufacturing costs	9,135
Fixed selling and administrative expenses	4,180
Total fixed costs		13,315
Income from operations		5,210

Notes:

Unit manufactured = 2,500 unit sold+ 400 ending inventory - 0 beginning inventory = 2,900 units

Variable cost of goods manufactured = Total cost of goods manufactured -fixed manufacturing cost

                = 43,500-9,135

                = 34,365

Variable selling and administrative cost = 8,530-4,180 = 4,350