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Illustration 5-6:


Illustration 5-6: Full versus variable costing when units produced are less than units sold

ClausenTube Income Statements For the Year Ended December 31, 2011

Full Costing







Sales ($2,000 × 7,200 units)





$14,400,000

Cost of goods sold







1,200 units × $1,100


$1,320,000




6,000 units × $1,100


6,600,000


7,920,000

Gross margin





6,480,000

Less selling and administrative expense:







Selling expense


$ 388,000




Administrative expense


500,000


888,000

Net income





$ 5,592,000

Notes: 6,000 units produced and 7,200 sold.

Selling expense = $100,000 + ($40 × 7,200 units).







Variable Costing







Sales ($2,000 × 7,200 units)

$14,400,000

Less variable costs:

Variable cost of goods sold
1,200 units × $900
$1,080,000
6,000 units × $900
5,400,000
6,480,000

Variable selling costs ($40 × 7,200)
288,000

Contribution margin
7,632,000
Less fixed costs:
Fixed production costs
1,200,000
Fixed selling costs
100,000
Fixed administrative costs
500,000
1,800,000
Net income
$ 5,832,000
Note: 6,000 units produced and 7,200 sold.

Answer these questions from the illustration:
Period expenses:
Find all selling and administrative expenses on the full costing statement. Tell us where you find these. What do they total?
Now find all selling and administrative expenses on the variable costing statement. Tell us where you find these. What do they total?

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