purposes EXERCISE 89 Variable Costing Income Statement Recon

purposes? EXERCISE 8-9 Variable Costing Income Statement; Reconciliation [LO2, LO3] Morey Company has just completed its first year of operations. The company\'s absorption costing income statement for the year appears below: MOREY COMPANY Income Statement 1350000 Cost of goods sold Baginning inventory.. Add cost of goods manufactured 1050,000 (50000 units at $21 per unit).. Goods aailable for sale Less ending inventory (10,000 units at $21 per unit) 840000 510000 210000 Gross margin Selling and administrative expenses Operating income.. 90000 The company\'s selling and administrative expenses consist of $300,000 per year in fixed expenses and $3 per unit sold in variable expenses. The company\'s $21 per unit product cost given above is computed as follows: $10 Direct materials... Direct labour... Variable manufacturing overhead Fixed manufacturingoverhead (S25000÷50 Unit product cost.. . unts) $21 1. Redo the company\'s income statement in the contribution format using variable costing. 2. Reconcile any difference between the operating income on your variable costing income statement and the operating income on the absorption costing income statement above. PROBLEMS PROBLEM 8-10 Variable Costing Income Statement; Reconciliation [L02, LO3 connect

Solution

2)Reconcile differ variable costing net operating income and absorption costing net operating income:

Sales 1350000 Less : variable cost of goods sold (40000*16) (640000) Gross contribution margin 710000 Less: variable selling and administrative exp (40000*3) (120000) Net contribution margin 590000 Less: fixed expenses Manufacturing exp (250000) Selling and administrative exp (300000) (550000) Net operating income 40000