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    Duif Company’s absorption costing income statement for the last year of operations is presented below

    Duif Company’s absorption costing income statement for the last year of operations is presented below:

    Sales…………………………………………………$70,000
    Less cost of goods sold:
    Beginning inventory………………………………………. 0
    Add cost of goods manufactured………………48,000
    Goods available for sale………………………….48,000
    Less ending inventory………………………………6,000
    Cost of goods sold………………………………..42,000
    Gross margin……………………………………….28,000
    Less selling & admin. expenses………………..25,000
    Net operating income…………………………..$ 3,000

    Data on units produced and sold for the year are given below:
    Units in beginning inventory……………………………..0
    Units produced……………………………………….8,000
    Units sold………………………………………………7,000

    Fixed factory overhead totaled $16,000 for the year. This overhead was applied to products at a rate of $2 per unit. Variable selling and administrative expenses were $3 per unit sold.

    Required: 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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