Problem:
The following absorption costing income statement and additional data are available from the accounting records of Bernon Co. for the month ended May 31, 2007. During the accounting period, 17,000 units were manufactured and sold at a price of $60 per unit. There were no beginning inventories.
Bernon Co.
Absorption Costing Income Statement
for the Month Ended May 31, 2007
Sales (17,000 @ $60) : $1,020,000
Cost of goods sold : 612,000
Gross profit : $ 408,000
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Selling and administrative expenses 66,000
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Income from operations $ 342,000
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Manufacturing costs:
(format: Total Cost - Number of Units - Unit Cost)
Variable: $442,000 - 17,000 - $26
Fixed : 170,000 - 17,000 - 10
Total : $612,000 - 34, 000 - $36
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Selling and administrative expenses:
Variable ($2 per unit sold) : $34,000
Fixed : 32,000
Total : $66,000
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Q. Prepare a new income statement for the year using variable costing. Comment on the differences, if any, between the absorption costing and the variable costing income statements.