Salem Screen Corporation manufactures and sells 50-inch television sets and uses standard costing. Actual data relating to January, February, and March 2020 are as follows: The selling price per unit is $2,300. The budgeted level of production used to calculate the budgeted fixed manufacturing cost per unit is 1,000 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. E: (Click to view the data.) March 150 1,075 1,080 January February Unit data: Beginning inventory 0 150 Production 1,000 950 Sales 850 950 Variable costs: Manufacturing cost per unit produced $ 600 $ 600 $ Operating (marketing) cost per unit sold $ 625 $ 625 $ Fixed costs: Manufacturing costs $ 420,000 $ 420,000 $ Operating (marketing) costs $ 120,000 $ 120,000 $ 600 625 420,000 120,000 Requirement 1. Prepare income statements for High - Tech in January, February, and March 2020 under (a) variable costing and (b) absorption costing. (a). Prepare income statements for High-Tech in January, February, and March of 2020 under variable costing. Complete the top half of the income statement for each month first, then complete the bottom portion. (Complete all input fields. Enter a "0" for any zero balance accounts.) January 2020 February 2020 March 2020 Revenues $ 2,530,000 $ 2,695,000 $ 2,849,000 Variable cost of goods sold: Beginning inventory 0 $ 80,000 $ 80,000 Variable manufacturing costs 1,000,000 980,000 1,020,000 Cost of goods available for sale 1,000,000 1,060,000 1,100,000 Deduct ending inventory (80,000) (80,000) (64,000) Variable cost of goods sold 920,000 980,000 1,036,000 Variable operating costs 948,750 1,010,625 1,068,375 Contribution margin 661,250 704,375 744,625 Fixed manufacturing costs 460,000 460,000 460,000 Fixed operating costs 110,000 110,000 110,000 Operating income $ 91,250 $ 134,375 $ 174,625 (b). Prepare income statements for High - Tech in January, February, and March 2020 under absorption costing. Complete the top half of the income statement for each month first, then complete the bottom portion (Enter a "O" 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 2020 February 2020 March 2020 Revenues $2,530,000 $2,695,000 $2,849,000 Cost of goods sold: Beginning inventory 0 $ 116,800 $ 116,800 Variable manufacturing costs 1,000,000 980,000 1,020,000 Allocated fixed manufacturing costs 460,000 450,800 469,200 Cost of goods available for sale 1,460,000 1,547,600 1,606,000 Deduct ending inventory (116,800) (116,800) (93,440) Adj. for production-volume variance 9,200 (9,200) Cost of goods sold 1,343,200 1,440,000 1,503,360 Gross margin 1,186,800 1,255,000 1,345,640 Variable operating costs 948,750 1,010,625 1,068,375 Fixed operating costs 110,000 110,000 110,000 Operating income $ 128,050 $ 134,375 $ 167,265 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 Fixed mfg costs in end. inventory Fixed mfg costs in beg. inventory Jan $ 128,050 $ 91,250 = $ 36,800 0 Feb $ 134,375 $ 134,375 36,800 $ 36,800 Mar $ 167,265 $ 174,625 $ 29,440 - $ 36,800 = = into inventories as inventories increase and out The difference between absorption and variable costing is due solely to moving fixed manufacturing costs of inventories as they decrease Salem Screen Corporation manufactures and sells 50-inch television sets and uses standard costing. Actual data relating to January, February, and March 2020 are as follows: The selling price per unit is $2,300. The budgeted level of production used to calculate the budgeted fixed manufacturing cost per unit is 1,000 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. E: (Click to view the data.) March 150 1,075 1,080 January February Unit data: Beginning inventory 0 150 Production 1,000 950 Sales 850 950 Variable costs: Manufacturing cost per unit produced $ 600 $ 600 $ Operating (marketing) cost per unit sold $ 625 $ 625 $ Fixed costs: Manufacturing costs $ 420,000 $ 420,000 $ Operating (marketing) costs $ 120,000 $ 120,000 $ 600 625 420,000 120,000 Requirement 1. Prepare income statements for High - Tech in January, February, and March 2020 under (a) variable costing and (b) absorption costing. (a). Prepare income statements for High-Tech in January, February, and March of 2020 under variable costing. Complete the top half of the income statement for each month first, then complete the bottom portion. (Complete all input fields. Enter a "0" for any zero balance accounts.) January 2020 February 2020 March 2020 Revenues $ 2,530,000 $ 2,695,000 $ 2,849,000 Variable cost of goods sold: Beginning inventory 0 $ 80,000 $ 80,000 Variable manufacturing costs 1,000,000 980,000 1,020,000 Cost of goods available for sale 1,000,000 1,060,000 1,100,000 Deduct ending inventory (80,000) (80,000) (64,000) Variable cost of goods sold 920,000 980,000 1,036,000 Variable operating costs 948,750 1,010,625 1,068,375 Contribution margin 661,250 704,375 744,625 Fixed manufacturing costs 460,000 460,000 460,000 Fixed operating costs 110,000 110,000 110,000 Operating income $ 91,250 $ 134,375 $ 174,625 (b). Prepare income statements for High - Tech in January, February, and March 2020 under absorption costing. Complete the top half of the income statement for each month first, then complete the bottom portion (Enter a "O" 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 2020 February 2020 March 2020 Revenues $2,530,000 $2,695,000 $2,849,000 Cost of goods sold: Beginning inventory 0 $ 116,800 $ 116,800 Variable manufacturing costs 1,000,000 980,000 1,020,000 Allocated fixed manufacturing costs 460,000 450,800 469,200 Cost of goods available for sale 1,460,000 1,547,600 1,606,000 Deduct ending inventory (116,800) (116,800) (93,440) Adj. for production-volume variance 9,200 (9,200) Cost of goods sold 1,343,200 1,440,000 1,503,360 Gross margin 1,186,800 1,255,000 1,345,640 Variable operating costs 948,750 1,010,625 1,068,375 Fixed operating costs 110,000 110,000 110,000 Operating income $ 128,050 $ 134,375 $ 167,265 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 Fixed mfg costs in end. inventory Fixed mfg costs in beg. inventory Jan $ 128,050 $ 91,250 = $ 36,800 0 Feb $ 134,375 $ 134,375 36,800 $ 36,800 Mar $ 167,265 $ 174,625 $ 29,440 - $ 36,800 = = into inventories as inventories increase and out The difference between absorption and variable costing is due solely to moving fixed manufacturing costs of inventories as they decrease