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.