Year 1 Assumption

Production = Sales
10,000 units = 10,000 units

Sales (10,000 units x $2,000)

Less: Variable Expenses

Cost of Goods Sold:
Beginning finished goods inventory
Cost of goods manufactured (10,000 units x $900)
Goods Available for sale
Ending finished goods inventory
Cost of goods sold
Selling Expense (10,000 units x $40)

Contribution Margin

Less Fixed Expenses:

Manufacturing overhead
Selling expenses
Administrative Expenses

Net Income

Year 2 Assumption
Production > Sales
10,000 units = 9,800 units

Sales ( 9,800 units x $2,000)

Less: Variable Expenses

Cost of goods sold:
Beginning finished goods inventory
Cost of goods manufactured (10,000 units x $900)
Goods Available for sale
Ending finished goods inventory (200 units x $900)
Cost of Goods Sold
Selling Expense (9,800 units x $40)
Contribution margin

Less: Fixed Expenses

Manufacturing overhead
Selling expense
Administrative expense

Net Income

Year 3 Assumption
Production < Sales
10,000 units = 10,200 units

Sales ( 10200 units x $2,000)

Less: Variable Expenses

Cost of goods sold:
Beginning finished goods inventory (200 units x $900)
Cost of goods manufactured (10,000 units x $900)
Goods Available for sale
Ending finished goods inventory (10,200 units x $900)
Cost of Goods Sold
Selling Expense (10,200 units x $40)

Contribution margin

Less: Fixed Expenses

Manufacturing overhead
Selling expense
Administrative expense

Net Income

A COMPARISON OF INCOME
Absorption Net Income
Year 1 (Production = Sales) 8,800,000.00
Year 2 (Production > Sales) 8,612,000.00
Year 3 (Production < Sales) 8,988,000.00
26,400,000.00
 FOOD INNOVATION NETWORK COMPANY
VARIABLE COSTING INCOME STATEMENT

Year 1 Assumption
Production = Sales
10,000 units = 10,000 units

20,000,000.00

-
9,000,000.00
9,000,000.00
-
9,000,000.00
400,000.00

10,600,000.00

1,200,000.00
100,000.00
500,000.00

8,800,000.00

Year 2 Assumption
Production > Sales
10,000 units = 9,800 units

19,600,000.00

-
9,000,000.00
9,000,000.00
180,000.00
8,820,000.00
392,000.00
 10,388,000.00

1,200,000.00
100,000.00
500,000.00

8,588,000.00

Year 3 Assumption
Production < Sales
10,000 units = 10,200 units

20,400,000.00

180,000.00
9,000,000.00
9,180,000.00
-
9,180,000.00
408,000.00

10,812,000.00

1,200,000.00
100,000.00
500,000.00

9,012,000.00

COME
Variable Net Income
8,800,000.00
8,588,000.00
9,012,000.00
26,400,000.00
 FOOD INNOVATION NETWO
ABSORPTION COSTING INCOME S
Year 1 Assumption
Production = Sales
10,000 units = 10,000 units

Sales (10,000 units x $2,000)

Less: Cost of Goods Sold

Beginning finished goods inventory
Cost of goods manufactured (10,000 units x $1,020)
Goods available for sale
Ending finished goods inventory
Cost of goods sold

Gross Margin

Operating Expenses
Selling Expenses ($100,000 + (10,000 units x $40)
Administrative Expenses

Net Operating Income

Year 2 Assumption
Production > Sales
10,000 units = 9,800 units

Sales (9,800 units x $2,000)

Less: Cost of Goods Sold

Beginning finished goods inventory
Cost of goods manufactured (10,000 units x $1,020)
Goods available for sale
Ending finished goods inventory (200 units x $1,020)
Cost of goods sold
Gross Margin

Operating Expenses
Selling Expenses ($100,000 + (9800 units x $40)
Administrative Expenses

Net Operating Income

Year 3 Assumption
Production < Sales
10,000 units = 10,200 units

Sales (10,200 units x $2,000)

Less: Cost of goods sold

Beginning finished goods inventory (200 units x $1,020)

Cost of goods manufactured (10,000 units x $1,020)
Goods Available for sale
Ending finished goods inventory
Cost of Goods Sold

Gross margin

Operating Expenses
Selling Expenses ($100,000 + (10,200 units x $40)
Administrative Expense

Net Income
 FOOD INNOVATION NETWORK COMPANY
ORPTION COSTING INCOME STATEMENT
Year 1 Assumption
Production = Sales
10,000 units = 10,000 units

20,000,000.00

-
10,200,000.00
10,200,000.00
-
10,200,000.00

9,800,000.00

500,000.00
500,000.00

8,800,000.00

Year 2 Assumption
Production > Sales
10,000 units = 9,800 units

19,600,000.00

-
10,200,000.00
10,200,000.00
204,000.00
9,996,000.00
 9,604,000.00

492,000.00
500,000.00

8,612,000.00

Year 3 Assumption Reconciliation of the operatin

Production < Sales
10,000 units = 10,200 units Variable costing net income

20,400,000.00 Fixed manufacturing overhead r

200 units x $120

Fixed manufacturing overhead d

204,000.00 0 units x $120
10,200,000.00
10,404,000.00 Absorption costing net income
-
10,404,000.00

9,996,000.00

508,000.00
500,000.00

8,988,000.00
-
Reconciliation of the operating income between variable costing and absorption costing

Variable costing net income 9,012,000.00

Fixed manufacturing overhead released from beginning inventory 24,000.00

200 units x $120

Fixed manufacturing overhead deferred in ending inventory

0 units x $120 -

Absorption costing net income 8,988,000.00