Duif Company's absorption costing income statement for the last year of operations is presented below:

Sales.........................................................$70,000

Less cost of goods sold:

Beginning inventory.............................................. 0

Add cost of goods manufactured..................48,000

Goods available for sale...............................48,000

Less ending inventory....................................6,000

Cost of goods sold......................................42,000

Gross margin..............................................28,000

Less selling & admin expenses....................25,000

Net operating income................................$ 3,000

Data on units produced and sold for the year are given below:

Units in beginning inventory...................................0

Units produced..............................................8,000

Units sold......................................................7,000

Fixed factory overhead totaled $16,000 for the year. This overhead was applied to products at a rate of $2 per unit. Variable selling and administrative expenses were $3 per unit sold.

Required:

Prepare a new income statement for the year using variable costing. Comment on the differences between the absorption costing and the variable costing income statements.

Answer rating: 100% (QA)

Variable income statement Sales 70000 Less Variable cost of goods sold ... View the full answer