Reference no: EM13597730

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.