4.16points

eBookHint

Print

References

Check my workCheck My Work button is now enabled

Item 6

Item 6 4.16 points

Whitman Company has just completed its first year of operations. The companys absorption costing income statement for the year follows:

Whitman Company Income Statement
Sales (41,000 units $45.10 per unit)	$	1,849,100
Cost of goods sold (41,000 units $23 per unit)		943,000
Gross margin		906,100
Selling and administrative expenses		512,500
Net operating income	$	393,600

The companys selling and administrative expenses consist of $307,500 per year in fixed expenses and $5 per unit sold in variable expenses. The $23 unit product cost given above is computed as follows:

Direct materials	$	11
Direct labor		4
Variable manufacturing overhead		4
Fixed manufacturing overhead ($204,000 51,000 units)		4
Absorption costing unit product cost	$	23

Required:

1. Redo the companys income statement in the contribution format using variable costing.

2. Reconcile any difference between the net operating income on your variable costing income statement and the net operating income on the absorption costing income statement above.

Redo the company's income statement in the contribution format using variable costing. Whitman Company Variable Costing Income Statement Reconcile any difference between the net operating income on your variable costing income statement and the net operating income on the absorption costing income statement above. (Enter any losses or deductions as a negative value.) Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Variable costing net operating income Absorption costing net operating income