Question

Variable Costing Income Statement On November 30, the end of the first month of operations, Weatherford Company prepared the following income statement, based on the absorption costing concept: Weatherford Company Absorption Costing Income Statement For the Month Ended November 30 Sales (2,700 units) $54,000 Cost of goods sold: Cost of goods manufactured (3,100 units) $43,400 Inventory, November 30 (400 units) (5,600) Total cost of goods sold 37,800 Gross profit $16,200 Selling and administrative expenses 9,410 Income from operations $6,790 Assume the fixed manufacturing costs were $10,416 and the fixed selling and administrative expenses were $4,610. Prepare an income statement according to the variable costing concept. Round all final answers to whole dollars. Weatherford Company Variable Costing Income Statement For the Month Ended November 30 $ Variable cost of goods sold: $ $ $ Fixed costs: $ $

Answer 1

(i) Selling and administrative expenses = $9,410

Fixed selling and administrative expenses = $4,610

Hence, variable selling and administrative expenses = Selling and administrative expenses - Fixed selling and administrative expenses

= 9,410 - 4,610

= $4,800

(ii) Cost of goods manufactured = $43,400

Fixed manufacturing costs = $10,416

Hence, variable Cost of goods manufactured = Cost of goods manufactured - Fixed manufacturing costs

= 43,400 - 10,416

= $32,984

Hence, inventory, November 30 (as per variable costing) = 32,984 x 400/3,100

= $4,256

Hence, variable cost of goods sold = variable Cost of goods manufactured - inventory, November 30 (as per variable costing)

= 32,984 - 4,256

= $28,728

Variable Costing Income Statement

Sales	54,000
Variable cost of goods sold 28,728
Variable selling and administrative expenses 4,800
Total variable costs	- 33,528
Contribution margin	20,472
Fixed manufacturing costs	- 10,416
Fixed selling and administrative expenses	- 4,610
Income from operations	$5,446