Diaz Company reports the following variable costing income statement for its single product. This company's sales totaled 50,000 units, but its production was 80.000 units. It had no beginning finished goods
Sales (50.000 units × $60 per unit)..................................................$3,000,000
Variable expenses
Variable manufacturing expense (50.000 units × $28 per unit)..................1,400,000
Variable selling and admin, expense (50,000 units × $5 per unit)..................250,000
Total variable expenses.................................................................1,650,000
Contribution margin.....................................................................1,350,000
Fixed expenses
Fixed overhead............................................................................320,000
Fixed selling and administrative expense..............................................160,000
Total fixed expenses......................................................................480,000
Net income...............................................................................$ 870,000
1. Convert this company's variable costing income statement to an absorption costing income statement.
2. Explain the difference in income between the variable costing and absorption costing income statement.