Whitney Company Has Just Completed Its First Year of Operations

question 127

Essay

Whitney Company has just completed its first year of operations.The company's accountant has prepared an absorption costing income statement for the year as seen below:
$\begin{array} { l } \text {Sales \( (35,000 \) units at \( \$ 25) \) }&&\$875,000 \\ \text {Beginning Inventory}&0 \\ \text {Cost of Goods Mantifactured \( (35,000 \times \$ 12)+\$ 160,000= \) }&580,000 \\ \text {Cost of Goods Available }&580,000 \\ \text {Ending Inventory }& 0\ \text { Cost of Goods Sold}&&580,000 \\ \text {Gross Margin }&&295,000 \\ \text {Selling and Administrative Expenses }&&280,000 \\ \text {Net Income }&&\$15,000 \\\end{array}$

The variable production costs per unit are determined as follows:
$\begin{array} { l } \text {Direct materials }&\$5 \\ \text {Direct labor }&6 \\ \text { Variable production}&1 \\ \text {Total variable production costs }&\$12 \\\end{array}$

The company's fixed production costs are $160,000 per year.The company's selling and administrative expenses consist of $210,000 per year in fixed expenses and $2 per unit in variable expenses.
Required:
Prepare the company's income statement in the contribution format.

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Definitions:

Median Mileage

The midpoint value of mileage data, where half of the vehicles have traveled more and half have traveled less, providing a measure of central tendency for vehicular use.

Fuel Economy

A measure of how far a vehicle can travel on a specific amount of fuel, usually expressed in miles per gallon (mpg) or liters per 100 kilometers (L/100km).

Environmental Protection Agency

A federal agency of the United States responsible for protecting human health and the environment by enforcing regulations based on laws passed by Congress.

Interquartile Range

A measure of variability, based on dividing a dataset into quartiles, that indicates the spread of the middle 50% of data points.