Topple Company_Variable costing

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Description

3.(TCO E) Topple Company produces a single product. Operating data for the
company and its absorption costing income statement for the last year is
presented below:

Units in beginning inventory

0

Units produced

9,000

Units sold

7,000

Sales

$100,000

Less cost of goods sold:

Beginning inventory

0

Add cost of goods manufactured

54,000

Goods available for sale

54,000

Less ending inventory

12,000

Cost of goods sold

42,000

Gross margin

58,000

Less selling and admin. expenses

28,000

Net operating income

$30,000

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 expenses were $1 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. (Points : 30)

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