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Business, 31.03.2021 04:40 stef6369

Whitman Company has just completed its first year of operations. The company’s absorption costing income statement for the year appears below: Whitman Company
Income Statement
Sales (40,000 units × $41.60 per unit) $ 1,664,000
Cost of goods sold (40,000 units × $21 per unit) 840,000
Gross margin 824,000
Selling and administrative expenses 460,000
Net operating income $ 364,000
The company’s selling and administrative expenses consist of $300,000 per year in fixed expenses and $4 per unit sold in variable expenses. The $21 per unit product cost given above is computed as follows:
Direct materials $ 11
Direct labor 3
Variable manufacturing overhead 3
Fixed manufacturing overhead ($204,000 ÷ 51,000 units) 4
Absorption costing unit product cost $ 21
Prepare the companys income statement in the contribution format using variable costing 1 the he format oosting Whitman Company Variable Costing Income Statement 1,664,000 Sales Variable expenses: Variable selling and administrative S 160,000 680,000 Variable cost of goods sold 840,000 824,000 Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative 824,000 Net operating income 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. Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Variable costing net operating income (loss) Add: Fixed manufacturing overhead cost deferred in inventory under absorption costing Absorption costing net operating income (loss)

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