ClausenTube Income Statements For the Year Ended December 31, 2011
Full Costing
Sales ($2,000 × 7,200 units) $14,400,000
Cost of goods sold
1,200 units × $1,100 $1,320,000
6,000 units × $1,100 6,600,000 7,920,000
Gross margin 6,480,000
Less selling and administrative expense:
Selling expense $ 388,000
Administrative expense 500,000 888,000
Net income $ 5,592,000
Notes: 6,000 units produced and 7,200 sold.
Selling expense = $100,000 + ($40 × 7,200 units).
Variable Costing
Sales ($2,000 × 7,200 units) $14,400,000
Less variable costs:
Variable cost of goods sold
1,200 units × $900 $1,080,000
6,000 units × $900 5,400,000 6,480,000
Variable selling costs ($40 × 7,200) 288,000
Contribution margin 7,632,000
Less fixed costs:
Fixed production costs 1,200,000
Fixed selling costs 100,000
Fixed administrative costs 500,000 1,800,000
Net income $ 5,832,000
Note: 6,000 units produced and 7,200 sold.
Answer these questions from the illustration:
Period expenses:
Find all selling and administrative expenses on the full costing statement. Tell us where you find these. What do they total?
Now find all selling and administrative expenses on the variable costing statement. Tell us where you find these. What do they total?
COGS (product costs):
What is COGS on the full costing income statement?
What is COGS on the variable costing income statement? (Be careful that you include all product costs)
What is the difference and why? (Hint - look at the units sold vs produced)