The vice-president for sales of Huber Corporation has received the following income statement for November, which was prepared on a variable-costing system. The firm has just adopted variable costing for its internal reporting. HUBER CORPORATION Income Statement For the Month of November (in thousands) Sales $2,400 Less variable cost of goods sold 1,200 Contribution margin 1,200 Less fixed manufacturing costs at budget 600 Gross margin 600 Less fixed selling and administrative costs 400 Net income before taxes $200 The controller attached the following notes with the statements: 1. The unit sales price for November averaged $24. 2. The unit manufacturing costs for the month were as follows: Variable costs Fixed costs applied Total cost $12 4 $16 The unit rate for fixed manufacturing costs is a predetermined rate based on a monthly production of 150,000 units. 3. 4. The variable costs per unit have been stable all year. 5. Production for November was 45,000 units in excess of sales. 6. The inventory at November 30 was 80,000 units. (a) The vice-president for sales is not comfortable with the variable-costing system and wonders what the net income would have been under the previous absorption-costing system. 1. Present the November income statement on an absorption-costing basis. HUBER CORPORATION Absorption-Costing Income Statement Sales in units November 30, 2020 For the Month Ended November 30, 2020For the Year Ended November 30, SalesGross ProfitSelling and Administrative CostsCost of Goods SoldNet Income / (Loss) Net Inco AddLess: Manufacturing Overhead Contribution Margin Net Ind Cost of Goods Sold Net Income Before Overhead AdjustmentOperating ExpensesCost of Goods I AddLess: Gross ProfitOverhead AdjustmentNet Income Before Gross ProfitSelling and Administrative CostsNet Income / (Loss) Net Income Before Overhead Adj AddLess: Selling and Administrative Costs Sales Net Income / (L Cost of Goods SoldGross Profit Cost of Goods Manufactured SalesCost of Goods Available for Sale 2. Reconcile and explain the difference between the variable-costing and absorption-costing net income figures. Variable-costing net income FMOH deferred in ending inventory FMOH released from beginning inventory Absorption-costing net income $ $

Managerial Accounting: The Cornerstone of Business Decision-Making
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Chapter3: Cost Behavior And Cost Forecasting
Section: Chapter Questions
Problem 54E: Income Statements under Absorption and Variable Costing In the coming year, Kalling Company expects...
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The vice-president for sales of Huber Corporation has received the following income statement for November, which was
prepared on a variable-costing system. The firm has just adopted variable costing for its internal reporting.
HUBER CORPORATION
Income Statement
For the Month of November
(in thousands)
Sales
$2,400
Less variable cost of goods sold
1,200
Contribution margin
1,200
Less fixed manufacturing costs at budget
600
Gross margin
600
Less fixed selling and administrative costs
400
Net income before taxes
$200
The controller attached the following notes with the statements:
1.
The unit sales price for November averaged $24.
2.
The unit manufacturing costs for the month were as follows:
Variable costs
Fixed costs applied
Total cost
$12
4
$16
The unit rate for fixed manufacturing costs is a predetermined rate based on a monthly production of 150,000 units.
3.
4.
The variable costs per unit have been stable all year.
5.
Production for November was 45,000 units in excess of sales.
6.
The inventory at November 30 was 80,000 units.
(a)
The vice-president for sales is not comfortable with the variable-costing system and wonders what the net income would have
been under the previous absorption-costing system.
1. Present the November income statement on an absorption-costing basis.
HUBER CORPORATION
Absorption-Costing Income Statement
Sales in units
November 30, 2020 For the Month Ended November 30, 2020For the Year Ended November 30,
SalesGross ProfitSelling and Administrative CostsCost of Goods SoldNet Income / (Loss) Net Inco
AddLess:
Manufacturing Overhead Contribution Margin Net Ind
Cost of Goods Sold Net Income Before Overhead AdjustmentOperating ExpensesCost of Goods I
AddLess:
Gross ProfitOverhead AdjustmentNet Income Before
Gross ProfitSelling and Administrative CostsNet Income / (Loss) Net Income Before Overhead Adj
AddLess:
Selling and Administrative Costs Sales Net Income / (L
Cost of Goods SoldGross Profit Cost of Goods Manufactured SalesCost of Goods Available for Sale
2. Reconcile and explain the difference between the variable-costing and absorption-costing net income figures.
Variable-costing net income
FMOH deferred in ending inventory
FMOH released from beginning inventory
Absorption-costing net income
$
$
Transcribed Image Text:The vice-president for sales of Huber Corporation has received the following income statement for November, which was prepared on a variable-costing system. The firm has just adopted variable costing for its internal reporting. HUBER CORPORATION Income Statement For the Month of November (in thousands) Sales $2,400 Less variable cost of goods sold 1,200 Contribution margin 1,200 Less fixed manufacturing costs at budget 600 Gross margin 600 Less fixed selling and administrative costs 400 Net income before taxes $200 The controller attached the following notes with the statements: 1. The unit sales price for November averaged $24. 2. The unit manufacturing costs for the month were as follows: Variable costs Fixed costs applied Total cost $12 4 $16 The unit rate for fixed manufacturing costs is a predetermined rate based on a monthly production of 150,000 units. 3. 4. The variable costs per unit have been stable all year. 5. Production for November was 45,000 units in excess of sales. 6. The inventory at November 30 was 80,000 units. (a) The vice-president for sales is not comfortable with the variable-costing system and wonders what the net income would have been under the previous absorption-costing system. 1. Present the November income statement on an absorption-costing basis. HUBER CORPORATION Absorption-Costing Income Statement Sales in units November 30, 2020 For the Month Ended November 30, 2020For the Year Ended November 30, SalesGross ProfitSelling and Administrative CostsCost of Goods SoldNet Income / (Loss) Net Inco AddLess: Manufacturing Overhead Contribution Margin Net Ind Cost of Goods Sold Net Income Before Overhead AdjustmentOperating ExpensesCost of Goods I AddLess: Gross ProfitOverhead AdjustmentNet Income Before Gross ProfitSelling and Administrative CostsNet Income / (Loss) Net Income Before Overhead Adj AddLess: Selling and Administrative Costs Sales Net Income / (L Cost of Goods SoldGross Profit Cost of Goods Manufactured SalesCost of Goods Available for Sale 2. Reconcile and explain the difference between the variable-costing and absorption-costing net income figures. Variable-costing net income FMOH deferred in ending inventory FMOH released from beginning inventory Absorption-costing net income $ $
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