Speedy Motors assembles and sells motor vehicles and uses standard costing. Actual data relating to April and May 2017 are asfollows:

April May

Unit data:

Beginning inventory 0 100

Production 500 425

Sales 400 475

Variable costs:

Manufacturing cost per unit produced $8,500 $8,500

Operating (marketing) cost per unit sold 2,200 2,200

Fixed costs:

Manufacturing costs $2,400,000 $2,400,000

Operating (marketing) costs 550,000 550,000.

The selling price per vehicle is $23,000. The budgeted level of production used to calculate the budgeted fixed manufacturing cost per unit is 500 units. There are noprice, efficiency, or spending variances. Anyproduction-volume variance is written off to cost of goods sold in the month in which it occurs.

1.

Make April and May 2017 income statements for Speedy Motors under(a) variable costing and(b) absorption costing.

(a) Make April and May 2017 income statements for Speedy Motors under variable costing. Complete the top half of the income statement for each monthfirst, then complete the bottom portion.

2.

Make a numerical reconciliation and explanation of the difference between operating income for each month under variable costing and absorption costing.