Acc505 Managerial Accounting: Week 8 (TCO E) Mesa Company produces a single product

Acc505 Managerial Accounting
Week 8

(TCO E) Mesa Company produces a single product. Operating data for the company and its absorption costing income statement for the last year are presented below:
Units in beginning inventory 2,000
Units produced 9,000
Units sold 10,000
Sales $100,000
Less cost of goods sold:
Beginning inventory 12,000
Add cost 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 expenses were $1 per unit sold.

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.
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