Question

(CO D) The following absorption costing income statement and additional data are available from the accounting records of Bernon Co. for the month ended May 31, XXXX. During the accounting period, 17,000 units were manufactured and sold at a price of $60 per unit. There were no beginning inventories.

Bernon Co. Absorption Costing Income Statement for the Month Ended May 31, XXXX
Sales (17,000 @ $60)	$1,020,000
Cost of goods sold	612,000
Gross profit	408,000
Selling and administrative expenses	66,000
Income from operations	$342,000

Additional Information:

Cost	Total Cost	Number of Units	Unit Cost
Manufacturing costs:
Variable	$442,000	17,000	$26
Fixed	170,000	17,000	10
Total	$612,000		$36
Selling and administrative expenses:
Variable ($2 per unit sold)			$34,000
Fixed			32,000
Total			$66,000

Required: Prepare a new income statement for the year using variable costing. Comment on the differences, if any, between the absorption costing and the variable costing income statements.

Please type the answer

Answer 1

Bernon Co.
Income Statement (Variable costing)
Sales		$ 1,020,000
Variable Expenses
Variable cost of goods sold ($612,000-$170,000)	$ 442,000
Variable selling administrative expenses (17,000*$2)	$    34,000
Total Variable expenses		$     476,000
Contribution Margin		$     544,000
Fixed Expenses
Fixed Manufacturing overhead	$ 170,000
Fixed selling and administrative expenses	$    32,000
Total Fixed Expenses		$     202,000
net operating income (Loss)		$     342,000

No differences between net income under absorption costing and variable costing. because entity sold entire manufactured product.

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