Crystal ClearCrystal Clear

Corporation manufactures and sells 50-inch television sets and uses standard costing. Actual data relating to January, February, and March

2017

are as follows:

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(Click to view the data.)

The selling price per unit is

$2,900.

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

1,000

units. There are noprice, efficiency, or spending variances. Any production-volume variance is written off to cost of goods sold in the month in which it occurs.Read the requirements

.

Requirement 1. Prepare income statements for

Crystal ClearCrystal Clear

in January, February, and March

2017

under (a) variable costing and (b) absorption costing.

(a). Prepare income statements for

Crystal ClearCrystal Clear

in January, February, and March of

2017

under variable costing.

Complete the top half of the income statement for each month first, then complete the bottom portion. (Complete all answer boxes. Enter a "0" for any zero balance accounts.)

January 2017

February 2017

March 2017

(b). Prepare income statements for

Crystal ClearCrystal Clear

in January, February, and March

20172017

under absorption costing.

Complete the top half of the income statement for each month first, then complete the bottom portion. (Enter a "0" for any zero balance accounts. Label any variances as favorable (F) or unfavorable (U). If an account does not have a variance, do not select a label. Abbreviation used; Adj. = Adjustment, Mfg. = Manufacturing.)

			January 2017			February 2017			March 2017

Requirement 2. Explain the difference in operating income for January, February, and March under variable costing and absorption costing.

Begin by preparing a numerical reconciliation and explanation of the difference between operating income for each month under variable costing and absorption costing. Determine the formula that will highlight the difference between the operating income under each method. Then complete the equation for each month. (Enter an amount in each input cell and enter a "0" for any zero balances. Abbreviations used: Beg. = beginning, End. = ending, Mfg. = Manufacturing, and Var. = Variable.)

	Absorption-costing		Variable-costing
	operating income	-	operating income	=		-

Jan

-

=

-

Feb

-

=

-

Mar

-

=

-

The difference between absorption and variable costing is due solely to moving

fixed manufacturing costs

fixed operating costs

variable manufacturing costs

variable operating costs

into inventories as inventories

decrease

increase

and out of inventories as they

decrease

increase

.

	January	February	March
Unit data:
Beginning inventory	0	150	150
Production	1,000	975	1,040
Sales	850	975	1,050
Variable costs:
Manufacturing cost per unit produced	$850	$850	$850
Operating (marketing) cost per unit sold	$475	$475	$475
Fixed costs:
Manufacturing costs	$480,000	$480,000	$480,000
Operating (marketing) costs	$200,000	$200,000	$200,000

1.	Prepare income statements for Crystal ClearCrystal Clear in January, February, and March 20172017 under (a) variable costing and (b) absorption costing.
2.	Explain the difference in operating income for January, February, and March under variable costing and absorption costing