(TCO E) Topple Company produces a single product. Operating data for the company
ID: 2345780 • Letter: #
Question
(TCO E) Topple Company produces a single product. Operating data for the company and its absorption costing income statement for the last year are presented below:Units in beginning inventory 2,000
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 and 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. (Points : 30)
Explanation / Answer
variable costing income statement
sales
100,000
variable costs:
variable manufacturing
40000
variable selling and admin
10000
total variable
50000
contribution margin
50,000
fixed costs:
fixed factory OH
18,000
fixed selling and admin
18,000
total fixed
36,000
net income
14,000
Net income is $2,000 higher under variable than absorption. They sold more than they produced, so more fixed overhead was expensed under absorption than variable. Fixed overhead is expensed under absorption based on what is sold.
variable costing income statement
sales
100,000
variable costs:
variable manufacturing
40000
variable selling and admin
10000
total variable
50000
contribution margin
50,000
fixed costs:
fixed factory OH
18,000
fixed selling and admin
18,000
total fixed
36,000
net income
14,000
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.