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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 x $42.10 per unit) Cost of goods sold (40,000 units $23 per unit) Gross margin Selling and administrative expenses Net operating income 1,684,000 920,000 764,000 420,000 344,000 The company's selling and administrative expenses consist of $300,000 per year in fixed expenses and $3 per unit sold in variable expenses. The $23 per unit computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($282,000 47,000 units) Absorption costing unit product cost $ 11 6 23

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 x $42.10 per unit) Cost of goods sold (40,000 units $23 per unit) Gross margin Selling and administrative expenses Net operating income 1,684,000 920,000 764,000 420,000 344,000 The company's selling and administrative expenses consist of $300,000 per year in fixed expenses and $3 per unit sold in variable expenses. The $23 per unit computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($282,000 47,000 units) Absorption costing unit product cost $ 11 6 23

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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 x $42.10 per unit) Cost of goods sold (40,000 units $23 per unit) Gross margin Selling and administrative expenses Net operating income The company's selling and administrative expenses consist of $300,000 per year in fixed expenses and $3 per unit sold in variable expenses. The $23 per unit product cost given above is computed as follows: Direct materials Direct labor 1,684,000 920,000 764,000 420,000 344,000 Variable manufacturing overhead Fixed manufacturing overhead ($282,000 47,000 units) Absorption costing unit product cost $ 11 6 23
Transcribed Image Text: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 x $42.10 per unit) Cost of goods sold (40,000 units $23 per unit) Gross margin Selling and administrative expenses Net operating income The company's selling and administrative expenses consist of $300,000 per year in fixed expenses and $3 per unit sold in variable expenses. The $23 per unit product cost given above is computed as follows: Direct materials Direct labor 1,684,000 920,000 764,000 420,000 344,000 Variable manufacturing overhead Fixed manufacturing overhead ($282,000 47,000 units) Absorption costing unit product cost $ 11 6 23
Required: 1. Prepare the company's income statement in the contribution format using variable costing. Variable expenses: Fixed expenses Whitman Company Variable Costing Income Statement 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 Not Operating Incomes (losses) Variable costing net operating income foss) Absorption costing net operating income (loss)
Transcribed Image Text:Required: 1. Prepare the company's income statement in the contribution format using variable costing. Variable expenses: Fixed expenses Whitman Company Variable Costing Income Statement 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 Not Operating Incomes (losses) Variable costing net operating income foss) Absorption costing net operating income (loss)
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