Duif Company’s absorption costing income statement for the last year of operations is presented below.
Sales…………………………………………………$70,000
Less cost of goods sold:
Beginning inventory………………………………………. 0
Add cost of goods manufactured………………48,000
Goods available for sale………………………….48,000
Less ending inventory………………………………6,000
Cost of goods sold………………………………..42,000
Gross margin……………………………………….28,000
Less selling and admin. expenses……………..25,000
Net operating income…………………………..$ 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.