Cool Car Motors assembles and sells motor vehicles and uses standard costing. Actual data relating to April and May 2014 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 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.

Requirements:

Prepare April and May 2014 income statements for Cool Car Motors under (a) variable costing and (b) absorption costing.

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

A B D April May 2 Unit data Beginning inventory Production 150 400 520 4 500 5 Sales 350 6 Variable costs Manufacturing cost per unit produced Operating (marketing) cost per unit sold 9 Fixed costs 10 Manufacturing costs 11 Operating (marketing) costs S 10,000 3,000 $ 10,000 3,000 7 8. |$2,000,000| 600,000 |S2,000,000 600,000 123 n