Mesa Company produces a single product. Operating data for the company and its absorption costing income statement for the last year are presented below:
| Units in beginning inventory | 2,000 |
| Units produced | 9,000 |
| Units sold | 10,000 |
| Sales | $100,000 |
| Less cost of goods sold: | |
| Beginning inventory | 12,000 |
| Add cost of goods manufactured | 54,000 |
| Goods available for sale | 66,000 |
| Less ending inventory | 6,000 |
| Cost of goods sold | 60,000 |
| Gross margin | 40,000 |
| Less selling and admin. expenses | 28,000 |
| Net operating income | $12,000 |
Variable manufacturing costs are $4 per unit. Fixed factory overhead totals $18,000 for the year. This overhead was applied at a rate of $2 per unit. Variable selling and administrative expenses were $1 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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