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 (40,000 units x $44.60 per unit) Cost of goods sold (40,000 units x $22 per unit) Gross margin Selling and administrative expenses Net operating income $ 1,784,000 880,000 904,000 460,000 $ 444,000 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 $22 unit product cost given above is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($180,000 45,000 units) Absorption costing unit product cost Required: $ 10 5 3 4 $ 22 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.

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 (40,000 units x $44.60 per unit) Cost of goods sold (40,000 units x $22 per unit) Gross margin Selling and administrative expenses Net operating income $ 1,784,000 880,000 904,000 460,000 $ 444,000 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 $22 unit product cost given above is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($180,000 45,000 units) Absorption costing unit product cost Required: $ 10 5 3 4 $ 22 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.

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter26: Manufacturing Accounting: The Job Order Cost System

Section: Chapter Questions

Problem 1CP

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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 (42,000 units x $43.60 per unit) Cost of goods sold (42,000 units x $23 per unit) Gross margin Selling and administrative expenses Net operating income $ 1,831, 200 966,000 865,200 483,000 $ 382,200 The company's selling and administrative expenses consist of $315,000 per year in fixed expenses and $4 per unit sold in variable expenses. The $23 unit product cost given above is computed as follows: Direct materials. Direct labor $ 10 4 Variable manufacturing overhead 3 Fixed manufacturing overhead ($276,000 46,000 units) 6 Absorption costing unit product cost $ 23 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…
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During Denton Company’s first two years of operations, the company reported absorption costing net operating income as follows:Year 1 Year 2Sales (@ $63 per unit) year 1$ 1,260,000 year 2 $ 1,890,000 Cost of goods sold (@ $35 per unit) year 1. $700,000 year 2.$1,050,000 Gross margin year 1$560,000 year 2 $840,000 Selling and administrative expenses*year 1 $312,000 year 2 $342,000 Net operating incomeyear 1$ 248,000 year 2$ 498,000 $3 per unit variable; $252,000 fixed each year.The company’s $35 unit product cost is computed as follows:Direct materials $ 7 Direct labor $8 Variable manufacturing overhead $3 Fixed manufacturing overhead ($425,000 ÷ 25,000 units) $17 Absorption costing unit product cost $ 35 Production and cost data for the two years are given below: Year 1 Year 2Units produced $25,000 $25,000Units sold. $20,000 $30,000 Prepare a variable costing contribution format income statement for each year. Reconcile the absorption costing and…