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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 (38,000 units X $44.10 per unit) $¹ Cost of goods sold (38,000 units x $23 per unit) Net operating income 1,675,800 Gross margin 801,800 Selling and administrative expenses 475,000 326,800 874,000 The company's selling and administrative expenses consist of $285,000 per year in fixed expenses and $5 per unit sold in variable expenses. The $23 per unit product cost given above is computed as follows: Absorption costing unit product cost Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($200,000+ 50,000 units) $11 4 4 4 23 Required: 1. Prepare the company's income statement in the contribution format using variable costing.

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 (38,000 units X $44.10 per unit) $¹ Cost of goods sold (38,000 units x $23 per unit) Net operating income 1,675,800 Gross margin 801,800 Selling and administrative expenses 475,000 326,800 874,000 The company's selling and administrative expenses consist of $285,000 per year in fixed expenses and $5 per unit sold in variable expenses. The $23 per unit product cost given above is computed as follows: Absorption costing unit product cost Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($200,000+ 50,000 units) $11 4 4 4 23 Required: 1. Prepare the company's income statement in the contribution format using variable costing.

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 appears below: Whitman Company Income Statement Sales (38,000 units x $44.10 per unit) $1,675,800 Cost of goods sold (38,000 units x $23 per unit) Gross margin Selling and administrative expenses Net operating income Direct materials Direct labor Absorption costing unit product cost The company's selling and administrative expenses consist of $285,000 per year in fixed expenses and $5 per unit sold in variable expenses. The $23 per unit product cost given above is computed as follows: 874,000 801,800 475,000 $ Variable manufacturing overhead Fixed manufacturing overhead ($200,000 + 50,000 units) Variable expenses: 326,800 Fixed expenses: Whitman Company Variable Costing Income Statement Required: 1. Prepare the company's income statement in the contribution format using variable costing. $11 4 4 4 $ $ 23 0 0 Absorption costing net operating income (loss) 0 0 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) $ 0
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 (38,000 units x $44.10 per unit) $1,675,800 Cost of goods sold (38,000 units x $23 per unit) Gross margin Selling and administrative expenses Net operating income Direct materials Direct labor Absorption costing unit product cost The company's selling and administrative expenses consist of $285,000 per year in fixed expenses and $5 per unit sold in variable expenses. The $23 per unit product cost given above is computed as follows: 874,000 801,800 475,000 $ Variable manufacturing overhead Fixed manufacturing overhead ($200,000 + 50,000 units) Variable expenses: 326,800 Fixed expenses: Whitman Company Variable Costing Income Statement Required: 1. Prepare the company's income statement in the contribution format using variable costing. $11 4 4 4 $ $ 23 0 0 Absorption costing net operating income (loss) 0 0 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) $ 0
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