The vice-president for sales of Huber Corporation has received the following income statement for November, which was prepared on a variable-costing system. The firm has just adopted variable costing for its internal reporting.

HUBER CORPORATION Income Statement For the Month of November (in thousands)
Sales		$2,400
Less variable cost of goods sold		1,200
Contribution margin		1,200
Less fixed manufacturing costs at budget		600
Gross margin		600
Less fixed selling and administrative costs		400
Net income before taxes		$200

The controller attached the following notes with the statements:

1.		The unit sales price for November averaged $24.
2.		The unit manufacturing costs for the month were as follows:

Variable costs		$12
Fixed costs applied		4
Total cost		$16

3.		The unit rate for fixed manufacturing costs is a predetermined rate based on a monthly production of 150,000 units.
4.		The variable costs per unit have been stable all year.
5.		Production for November was 45,000 units in excess of sales.
6.		The inventory at November 30 was 80,000 units.

(a) The vice-president for sales is not comfortable with the variable-costing system and wonders what the net income would have been under the previous absorption-costing system.

2. Reconcile and explain the difference between the variable-costing and absorption-costing net income figures.

Variable-costing net income		$
FMOH deferred in ending inventory
FMOH released from beginning inventory
Absorption-costing net income		$

Answer rating: 100% (QA)

To calculate the net income under the previous absorptioncosting system we need to consider both variable and fixed manufacturing costs To reconcile t... View the full answer