Race Track Motors assembles and sells motor vehicles and uses standard costing. Actual data relating to April and May 2017 are as follows: (Click the icon to view the data.) The selling price per vehicle is $25,000. The budgeted level of production used to calculate the budgeted fixed manufacturing cost per unit is 500 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. Read the requirements Requirement 1. Prepare April and May 2017 income statements for Race Track Motors under (a) variable costing and (b) absorption costing. (a) Prepare April and May 2017 income statements for Race Track Motors 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 "O" for any zero balance accounts.) April 2017 May 2017 (1) Revenues (2) Variable cost of goods sold: (3) Beginning inventory (4) Variable manufacturing costs (5) Cost of goods available for sale (6) Deduct ending inventory (7) Variable cost of goods sold (8) Variable operating costs (9) Contribution margin (10) (11) (12) (b) Prepare April and May 2017 income statements for Race Track Motors 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.) April 2017 May 2017 (13) (14) (15) (16) (17) (18) (19) (21) (22) (20) (23) (24) (25) (26) (27) Requirement 2. Prepare a numerical reconciliation and explanation of the difference between operating income for each month under variable costing and absorption costing. Begin by determining the formula that will highlight the difference between the operating income under each method. Then complete the equation for each month. (Abbreviations used: Beg. = Beginning, End. = Ending, Var. = Variable, Mfg = Manufacturing. Complete all answer boxes. Enter a "0" for any zero balance accounts.) Variable-costing Absorption-costing operating income operating income (28) (29) Apr May The difference between absorption and variable costing is due solely to moving (30) into inventories as inventories (31) and out of inventories as they (32) 1: Data Table April May Unit data: 0 100 Beginning inventory Production 500 475 Sales 400 550 Variable costs: 11,500 $ 11,500 Manufacturing cost per unit produced Operating (marketing) cost per unit sold 3,800 3,800 Fixed costs: $ 2,000,000 $ 2,000,000 Manufacturing costs Operating (marketing) costs 625,000 625,000 2: Requirements 1. Prepare April and May 2017 income statements for Race Track 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. Race Track Motors assembles and sells motor vehicles and uses standard costing. Actual data relating to April and May 2017 are as follows: (Click the icon to view the data.) The selling price per vehicle is $25,000. The budgeted level of production used to calculate the budgeted fixed manufacturing cost per unit is 500 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. Read the requirements Requirement 1. Prepare April and May 2017 income statements for Race Track Motors under (a) variable costing and (b) absorption costing. (a) Prepare April and May 2017 income statements for Race Track Motors 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 "O" for any zero balance accounts.) April 2017 May 2017 (1) Revenues (2) Variable cost of goods sold: (3) Beginning inventory (4) Variable manufacturing costs (5) Cost of goods available for sale (6) Deduct ending inventory (7) Variable cost of goods sold (8) Variable operating costs (9) Contribution margin (10) (11) (12) (b) Prepare April and May 2017 income statements for Race Track Motors 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.) April 2017 May 2017 (13) (14) (15) (16) (17) (18) (19) (21) (22) (20) (23) (24) (25) (26) (27) Requirement 2. Prepare a numerical reconciliation and explanation of the difference between operating income for each month under variable costing and absorption costing. Begin by determining the formula that will highlight the difference between the operating income under each method. Then complete the equation for each month. (Abbreviations used: Beg. = Beginning, End. = Ending, Var. = Variable, Mfg = Manufacturing. Complete all answer boxes. Enter a "0" for any zero balance accounts.) Variable-costing Absorption-costing operating income operating income (28) (29) Apr May The difference between absorption and variable costing is due solely to moving (30) into inventories as inventories (31) and out of inventories as they (32) 1: Data Table April May Unit data: 0 100 Beginning inventory Production 500 475 Sales 400 550 Variable costs: 11,500 $ 11,500 Manufacturing cost per unit produced Operating (marketing) cost per unit sold 3,800 3,800 Fixed costs: $ 2,000,000 $ 2,000,000 Manufacturing costs Operating (marketing) costs 625,000 625,000 2: Requirements 1. Prepare April and May 2017 income statements for Race Track 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
