Assume Thibodeau Company manufactures candy bars and has the…
Assume Thibodeau Company manufactures candy bars and has the following information:
Volume Information
2013
Candybars in beginning inventory
20,000
Candy bars produced
40,000
Candy bars sold
30,000
Financial Information
Selling price per candy bar
$1.00
Variable manufacturing cost per candy bar
$ .40
Fixed manufacturing cost per year
$12,000
Fixed manufacturing cost per candy bar
$ .30
Variable selling and administrative expense per candy bar
$ .05
Fixed selling and administrative expense
$ 4,000
The absorption costing income statement and variable costing income statement are shown below:
Thibodeau Company
Income Statement
For the Year Ended 2013
Absorption Costing
Sales (30,000 X $1.00)
$30,000
Cost of goods sold [30,000 X ($.40 + $.30)]
21,000
Gross profit
9,000
Variable selling and administrative expenses (30,000 X $.05)
$1,500
Fixed selling and administrative expenses
4,000
5,500
Net income
$ 3,500
Thibodeau Company
Income Statement
For the Year Ended 2013
Variable Costing
Sales (30,000 X $1.00)
$30,000
Variable costs of good sold (30,000 X $.40)
$12,000
Variable selling and administrative expenses (30,000 X $.05)
1,500
13,500
Contribution margin
16,500
Fixed manufacturing overhead
12,000
Fixed selling and administrative expense
4,000
16,000
Net income
$ 500
15.
The effects of the alternative costing methods on income from operations are:
Circumstance
Effects on Income From Operations
Units produced exceed units sold
Income under absorption costing is higher than under variable costing
Units produced are less than units sold
Income under absorption costing is lower than under variable costing
Units produced equal units sold
Income will be equal under both approaches
