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Prepare new income statement for the year

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Problem - 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 0

Units produced 9,000

Units sold 7,000

Sales $100,000

Less cost of goods sold:

Beginning inventory 0

Add cost of goods manufactured 54,000

Goods available for sale 54,000

Less ending inventory 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 manufacturing overhead totals $18,000 for the year. The fixed manufacturing overhead was applied at a rate of $2 per unit. Variable selling and administrative expenses were $1 per unit sold.

Required - Prepare new income statement for the year using variable costing. Comment on the differences between the absorption costing and the variable costing income statements.

Reference no: EM132453968

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