Units in beginning inventory 0
Units produced 9,000
Units sold 7,000
Less cost of goods sold:
Beginning inventory 0
Add cost of goods manufactured 54,000
Goods available for sale 54,000
Less ending inventory 12,000
Cost of goods sold 42,000
Gross margin 58,000
Less selling & admin. expenses 28,000
Net operating income $30,000
Variable manufacturing costs are $4 per unit. Fixed factory overhead totals $18,000 for the year. This overhead was applied at a rate of $2 per unit. Variable selling and administrative expenses were $1 per unit sold.
Prepare a new income statement for the year using variable costing. Comment on the differences between the absorption costing and the variable costing income statements.
Solution is provided in a separate excel file attached. It contains following statements.
The difference between absorption and variable costing income statements are examined.