Reference no: EM13394934

Hanks 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..................................................8,000
Sales.....................................................$80,000
Less cost of goods sold:
Beginning inventory....................................... 0
Add cost of goods manufactured.............54,000
Goods available for sale.........................54,000
Less ending inventory..............................6,000
Cost of goods sold.................................48,000
Gross margin........................................32,000
Less selling & admin. expenses..............28,000
Net operating income............................$ 4,000

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.