Rathke Industries manufactures and sells a single product. The controller has prepared the following income statement for the most recent year:

The company produced 14,000 units and sold 8,500 units during the year ending December 31. Fixed manufacturing overhead (MOH) for the year was $266,000, while fixed operating expenses were $58,000. The company had no beginning inventory.
Requirements
1. Will the company's operating income under variable costing be higher, lower, or the same as its operating income under absorption costing? Why?
2. Project the company's operating income under variable costing without preparing a variable costing income statement.
3. Prepare a variable costing income statement for the year.

Transcribed Image Text:

Rathke Industries Traditional Income Statement (Absorption Costing) For the Year Ended December 31 Sales revenue Less: Cost of goods sold Gross profit Less: Operating expenses Operating income 595,000 510,000 85,000 65,000 20,000