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 - 0
- Units produced - 9,000
- Units sold - 7,000
- Sales - 100,000
Less Cost of Goods Sold
- Beginning inventory - 0
- Add Cost of goods manfuctured - 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 and 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.
Required: Prepare a new income statement for the year using variable costing. Comment on the differences between the absorption costing andthevariable costing income statements.