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"hitman Company has just completed its first year of operations. The company's absorption costing income statement for the year ollows: Whitman Company Income Statement Sales (41,000 units $41.60 per unit) Cost of goods sold (41,000 units $25 per unit) Gross margin Selling and administrative expenses Net operating income Direct materials Direct labor The company's selling and administrative expenses consist of $307,500 per year in fixed expenses and $4 per unit sold in variable expenses. The $25 unit product cost given above is computed as follows: $ 1,705,600 1,025,000 680,600 471,500 $ 209,100 Variable manufacturing overhead Fixed manufacturing overhead ($306,000 51,000 units) Absorption costing unit product cost $ 11 5 3 6 $ 25 Required: 1. Redo the company's income statement in the contribution format using variable costing. 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 above.

"hitman Company has just completed its first year of operations. The company's absorption costing income statement for the year ollows: Whitman Company Income Statement Sales (41,000 units $41.60 per unit) Cost of goods sold (41,000 units $25 per unit) Gross margin Selling and administrative expenses Net operating income Direct materials Direct labor The company's selling and administrative expenses consist of $307,500 per year in fixed expenses and $4 per unit sold in variable expenses. The $25 unit product cost given above is computed as follows: $ 1,705,600 1,025,000 680,600 471,500 $ 209,100 Variable manufacturing overhead Fixed manufacturing overhead ($306,000 51,000 units) Absorption costing unit product cost $ 11 5 3 6 $ 25 Required: 1. Redo the company's income statement in the contribution format using variable costing. 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 above.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year follows: Whitman Company Income Statement Sales (41,000 units x $41.60 per unit) Cost of goods sold (41,000 units $25 per unit) Gross margin Selling and administrative expenses Net operating income. The company's selling and administrative expenses consist of $307,500 per year in fixed expenses and $4 per unit sold in variable expenses. The $25 unit product cost given above is computed as follows: Direct materials Direct labor Variable manufacturing overhead $ 1,705,600 1,025,000 680,600 471,500 $ 209,100 Fixed manufacturing overhead ($306,000 51,000 units) Absorption costing unit product cost $ 11 5 3 6 $ 25 Required: 1. Redo the company's income statement in the contribution format using variable costing. 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 above.
Transcribed Image Text:Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year follows: Whitman Company Income Statement Sales (41,000 units x $41.60 per unit) Cost of goods sold (41,000 units $25 per unit) Gross margin Selling and administrative expenses Net operating income. The company's selling and administrative expenses consist of $307,500 per year in fixed expenses and $4 per unit sold in variable expenses. The $25 unit product cost given above is computed as follows: Direct materials Direct labor Variable manufacturing overhead $ 1,705,600 1,025,000 680,600 471,500 $ 209,100 Fixed manufacturing overhead ($306,000 51,000 units) Absorption costing unit product cost $ 11 5 3 6 $ 25 Required: 1. Redo the company's income statement in the contribution format using variable costing. 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 above.
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