The difference in profit between the two income statements

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Reference no: EM131773098

Hamilton Heating Company is a small manufacturer of auxiliary heaters. The units sell for $100 each. In 2008, the company produced 1,200 units and sold 1,000 units. Below are variable and full costing income statements for 2008.

Income Statement Prepared Using Variable Costing

Hamilton Heating Company

Income Statement

For the Year Ending December 31, 2008

Sales

 

$ 100,000

Less variable costs:

   

     Variable cost of goods sold

$20,000

 

     Variable selling expense

10,000

30,000

Contribution margin

 

70,000

Less fixed costs:

   

     Fixed manufacturing expense

24,000

 

     Fixed selling expense

8,000

 

     Fixed administrative expense

12,000

44,000

Net Income

 

$26,000

Income Statement Prepared Using Full Costing

Hamilton Heating Company

Income Statement

For the Year Ending December 31, 2008

Sales

 

$ 100,000

Less  cost of goods sold

 

40,000

Gross margin

 

60,000

Less selling and administrative expenses:

   

     Selling expense

$18,000

 

     Administrative expense

12,000

30,000

     

Net Income

 

$30,000

Required:

Reconcile the difference in profit between the two income statements.

Reference no: EM131773098

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