Question - Duif Company's absorption costing income statement for the last year of operations is presented below:
Sales.........................................................$70,000
Less cost of goods sold:
Beginning inventory.............................................. 0
Add cost of goods manufactured..................48,000
Goods available for sale...............................48,000
Less ending inventory....................................6,000
Cost of goods sold......................................42,000
Gross margin..............................................28,000
Less selling & admin. expenses....................25,000
Net operating income................................$ 3,000
Data on units produced and sold for the year are given below:
Units in beginning inventory...................................0
Units produced..............................................8,000
Units sold......................................................7,000
Fixed factory overhead totaled $16,000 for the year. This overhead was applied to products at a rate of $2 per unit. Variable selling and administrative expenses were $3 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.