Reference no: EM132685850
Problem - Variable and Absorption Costing
Whirlpool Corporation had the following abbreviated income statement for a recent year: (in millions)
Net sales $17,099
Cost of goods sold $14,713
Selling administrative, and other expenses 1,544
Total expenses $16,257
Income from operations $842
Assume that there were $3,680 million fixed manufacturing costs and $890 million fixed selling, administrative, and other costs for the year.
The finished goods inventories at the beginning and end of the year from the balance sheet were as follows:
January 1 $2,591 million
December 31 $2,197 million
Assume that 30% of the beginning and ending inventory consists of fixed costs. Assume work in process and materials inventory were unchanged during the period.
Required -
a. Prepare an income statement according to the variable costing concept for Whirlpool Corporation for the recent year.
b. Explain the difference between the amount of income from operations reported under the absorption costing and variable costing concepts.
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: Variable and Absorption Costing - Prepare an income statement according to the variable costing concept for Whirlpool Corporation for the recent year
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