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.

Fixed Indirect Production Costs Affect the Calculation of ________ on the Absorption

Multiple Choice

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