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

The company produced 9,000 units and sold 8,000 units during the year ending December 31. Fixed manufacturing overhead (MOH) for the year was $ 171,000, while fixed operating expenses were $ 56,000. 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 theyear.

Wilson Industries Traditional Income Statement (Absorption Costing) For the Year Ended December 31 5 Sales revenue 5528000 : 424000 104,000 6 Less: Cost of goods sold 7 Gross profit 8 Less: Operating expenses 91 Operating income S35,000 10