Topple Company generates a single product. Operating data for the company and its absorption costing income statement for the last year are represented below:
Units in starting inventory 2,000 Units produced 9,000 Units sold 10,000 Sales $100,000
Less cost of goods sold:
Starting inventory 12,000 Add costs 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 expenditures were $1 per unit sold.
Required: Make a new income statement for the year by using variable costing. Comment on the differences between the absorption costing and the variable costing income statements.