Whitman Company hasjust completed its first year of operations. The company’sabsorption costing income statement for the year follows:
Whitman Company
Income Statement |
| Sales (41,000units × $43.10 per unit) | $ | 1,767,100 |
| Cost of goodssold (41,000 units × $23 per unit) | | 943,000 |
| Grossmargin | | 824,100 |
| Selling andadministrative expenses | | 471,500 |
| Net operatingincome | $ | 352,600 |
|
The company’s sellingand administrative expenses consist of $307,500 per year in fixedexpenses and $4 per unit sold in variable expenses. The $23 unitproduct cost given above is computed as follows:
| | |
| Directmaterials | $ | 11 |
| Directlabor | | 4 |
| Variablemanufacturing overhead | | 3 |
| Fixedmanufacturing overhead ($250,000 ÷ 50,000 units) | | 5 |
| Absorptioncosting unit product cost | $ | 23 |
|
Required:
1. Redo the company’sincome statement in the contribution format using variablecosting.
2. Reconcile anydifference between the net operating income on your variablecosting income statement and the net operating income on theabsorption costing income statement above.
variable costing netoperating income ____
___________________________
absorption costing netoperating income _____
