Topple Company produces a single product. Operating data for the company and its absorption costing income statement for the last year is presented below:
- Units in beginning inventory...2000
- Units produced ....9,000
- Units sold .......10,000
- Sales..... $100,000
Less cost of goods sold:
- Beginning inventory 12,000
- Add cost of goods manufactured .....54,000
- Goods available for sale..... 66,000
- Less ending inventory.... 6,000
- Cost of goods sold ....60,000
- Gross margin.... 40,000
- Less selling & admin. expenses ...28,000
- Net operating income.. $12,000
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.
Required: 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.