6.2: Units manufactured equals units sold

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The following is a side-by-side comparison of variable and absorption costing income statements when 15,000 units have been manufactured and 15,000 units have been sold.

Units manufactured equals units sold Manufactured 15,000 units / Sold 15,000
Variable Costing Income Statement
Sales		$750,000	15,000 x $50	• Variable cost of goods sold equals the 15,000 units sold times the variable manufacturing cost per unit of $25.
Variable cost of goods sold		375,000	15,000 x $25
Manufacturing margin		$375,000
Variable selling and administrative expenses		75,000	15,000 x $5
Contribution margin		$300,000
Fixed costs:				• Variable selling and administrative expenses equals the 15,000 units sold times the variable amount per unit of $5.
Fixed manufacturing costs	$150,000
Fixed selling and administrative expenses	50,000
Total fixed costs		200,000
Operating income		$100,000

Units manufactured equals units sold Manufactured 15,000 units / Sold 15,000
Absorption Costing Income Statement
Sales	$750,000	15,000 x $50	Cost of goods sold equals the 15,000 units sold times the sum of the variable manufacturing cost per unit of $25 plus the fixed manufacturing cost per unit of $10 ($150,000 total fixed cost / 15,000 units produced.) Selling and administrative expenses equals the 15,000 units sold times the variable amount per unit of $5 plus the fixed selling and administrative expenses of $50,000.
Cost of goods sold	525,000	15,000 x ($25 + $10)
Gross profit	$225,000
Selling and administrative expenses	125,000	(15,000 x $5) + 50,000
Operating income	$100,000

Note that the operating income on both the variable costing and absorption costing income statements is the same, $100,000. This will always be the case when the number of units manufactured equals the number of units sold because there is no change in the number of units in inventory. The beginning and ending number of units in inventory are the same since the number of units added is the same as the number removed.