Absorption Statement Absorption costing does not distinguish between variable and fixed costs. All manufacturing costs are included in the cost of goods sold. Saxon, Inc. Absorption Costing Income Statement For the Year Ended December 31 Sales Cost of goods sold: Cost of goods manufactured Ending inventory Total cost of goods sold Gross profit Selling and administrative expenses Operating Income $1,200,000 $800,000 (160,000) (640,000) $560,000 (273,000) $287,000 Variable Statement Under variable costing, the cost of goods manufactured includes only variable manufacturing costs. This type of income statement includes a computation of manufacturing margin. Saxon, Inc. Variable Costing Income Statement For the Year Ended December 31 Absorption Statement Absorption costing does not distinguish between variable and fixed costs. All manufacturing costs are included in the cost of goods sold. Saxon, Inc. Absorption Costing Income Statement For the Year Ended December 31 Sales Cost of goods sold: Cost of goods manufactured Ending inventory Total cost of goods sold Gross profit Selling and administrative expenses Operating income $1,200,000 $800,000 (160,000) (640,000) $560,000 (273,000) $287,000 2 Variable Statement Under variable costing, the cost of goods manufactured includes only variable manufacturing costs. This type of income statement includes a computation of manufacturing margin. Saxon, Inc. Variable Costing Income Statement. For the Year Ended December 31 Sales Check My Work 5 more Check My Work uses remaining. $1,200,000 Sales For the Year Ended December 31 $1,200,000 Wariable cost of goods sold: Variable cost of goods manufactured $560,000 Ending inventory (112,000) Total variable cost of goods sold (448,000) Manufacturing margin $752,000 Variable selling and administrative expenses Contribution margini (208,000) $544,000 Fixed costs: Fixed manufacturing costs Fixed selling and administrative expenses Total fixed costs Operating income $240,000 65,000 (305,000) $239,000 Method Comparison Review the income statements on the Absorption Statement and Variable Statement, then complete the following table. The company's sales price per unit is $75, and the number of units in ending inventory is 4,000. There was no beginning inventory. Item Number of units sold Variable sales and administrative cost per unit wwrc use remaining Amount Method Comparison Review the income statemerits on the Absorption Statement and Variable Statement, then complete the following table. The company's sales price per unit is $75, and the number of units in ending inventory is 4,000. There was no beginning inventory. Item Amount Number of units sold Variable sales and administrative cost per unit Number of units manufactured Variable cost of goods manufactured per unit Fixed manufacturing cost per unit