Question

Hanks Company produces a single product. Operating data for the company and its absorption costing income statement for the last year is presented below.
Units in beginning inventory................................... 0 Units produced.................................................. 9,000 Units sold.......................................................... 8,000 Sales............................................................. $ 80,000 Less cost of goods sold: Beginning inventory................................................ 0 Add cost of goods manufactured................... 54,000 Goods available for sale................................ 54,000 Less ending inventory..................................... 6,000 Cost of goods sold......................................... 48,000 Gross margin................................................. 32,000 Less selling and admin Expenses.................. 28,000
Net operating income.................................... $ 4,000
  Variable manufacturing costs are $4 per unit. Fixed factory overhead totals $18,000 for the year. This overhead was applied at a rate of $2 per unit. Variable selling and administrative expenses were $1 per unit sold.
Required:  Prepare a new income statement for the year using variable costing. Comment on the differences between the absorption costing and the variable costing income statements.



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  • CreatedAugust 26, 2013
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