April

May

Unit data

Beginning inventory

0

150

Production

600

500

Sales

450

600

Variable costs

Manufacturing cost per unit produced

$10,000

$10,000

Operating (marketing) cost per unit sold

4,000

4,000

Fixed costs

Manufacturing costs

$2,400,000

$2,400,000

Operating (marketing) costs

FastRideFastRide Motors assembles and sells motor vehicles and uses standard costing. Actual data relating to April and May

20142014

are as follows:

The selling price per vehicle is

$29,000.

The budgeted level of production used to calculate the budgeted fixed manufacturing cost per unit is

600

units. There are no price, efficiency, or spending variances. Any production-volume variance is written off to cost of goods sold in the month in which it occurs.

Requirements

1.	Prepare April and May 2014 income statements for FastRideFastRide Motors under (a) variable costing and (b) absorption costing.
2.	Prepare a numerical reconciliation and explanation of the difference between operating income for each month under variable costing and absorption costing.

500,000

500,000