They have a Contribution margin of $3,920,000. However, my Contribution margin is different. Why am I doing wrong to get a Contribution Margin of $4,320,000?

E9-21 (similar to), Cool Ride 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 $21,000. The budgeted level of production used to calculate the budgeted fixed manufacturing cost per unit is 400 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 i Data Table April May 0 50 400 375 400 350 Unit data: Beginning inventory Production Sales Variable costs: Manufacturing cost per unit produced Operating (marketing) cost per unit sold Fixed costs: Manufacturing costs Operating (marketing) costs 8,000 $ 3,200 8,000 3,200 $ 2,000,000 $ 2,000,000 625,000 625,000 i Requirements 1. Prepare April and May 2017 income statements for Cool Ride 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 Let's first review the difference between variable and absorption costing 1 Variable Costing Absorption Costing - Method of inventory costing in which all variable manufacturing -Absorption costing is a method of inventory costing in which costs (direct and indirect) are included as inventoriable costs all variable manufacturing costs and all fixed manufacturing Note that not all variable costs are inventoriable costs. Only costs are included as inventoriable costs. That is, inventory variable manufacturing costs are inventoriable. "absorbs" all manufacturing costs. - Fixed manufacturing costs are inventoriable costs. - All fixed manufacturing costs are excluded from inventoriable costs and are instead treated as expenses of the period in which they are incurred Under both methods. All variable manufacturing costs are inventoriable costs and all nonmanufacturing costs in the value chain (such as research and development and marketing), whether variable or fixed, are period costs and are recorded as expenses when incurred 1 Requirement 1. Prepare April and May 2017 income statements for Cool Ride Motors under (a) variable costing and (b) absorption costing Another term for a variable costing income statement is a contribution margin income statement. Recall that Contribution Margin = Revenues - Variable Costs. Therefore the top half of the statement will be the revenue and variable cost accounts. Complete the top half of the income statement for each month first. Use these formulas to calculate the amounts for the income statements (Complete all answer boxes. Enter a "0" for any zero balance accounts.) i Formulas Revenues Variable manufacturing costs Variable operating costs Ending inventory Selling price per vehicle x Vehicles sold = Variable manufacturing cost per vehicle x Vehicles produced = Variable operating cost per vehicle x Vehicles sold = Variable manufacturing cost per vehicle x Vehicles in ending inventory April 2017 $ 7,350,000 May 2017 $ 8,400,000 $ 400,000 Revenues Variable cost of goods sold: Beginning inventory Variable manufacturing costs Cost of goods available for sale Deduct ending inventory Variable cost of goods sold Variable operating costs Contribution margin 3.200.000 3,200.000 (400,000) 3,000,000 3,400,000 (200.000) 2,800,000 1,120,000 3,200,000 1,280,000 3,430,000 3,920,000 May-2017:1 1 Budgeted (Planned)-Net (Total) Sales Revenue: 1 *$21,000 -is Budgeted (Planned) Sales (Selling Price Per-Unit [Refer to-financial information-in- word problem] *400 units of sold vehicles in May 1 Budgeted (Planned)-Net (Total) Sales Revenue Formula = Budgeted (Planned) Sales (Selling Price per unit-x-Units sold 1 =-Budgeted (Planned) Net (Total) Sales Revenue 1 =-$21,000 Budgeted (Planned) Sales (Selling) price per unit-x-400-vehicles sold (actual-sales) =-$8,400,000. Completed 1 $8,400,000 is the Budgeted (Planned)-Net (Total). Sales Revenue. Beginning-Inventory (Beginning balance of account called-Work-in-Process Inventory): 50 number of vehicles (units) at the beginning balance of Work-in-Process Inventory. I =-50 vehicles-x-$8,000 (Variable (Manufacturing cost per unit produced) =-$400,000-V Completed V $400.000 is the Beginning Inventory and/or dollar value for the 50 number of vehicles at the beginning balance of Work-in-Process Inventory. I Total Variable Manufacturing Costs: 1 *$8.000 Variable-(Manufacturing cost per vehicles produced) *375 units of budgeted (planned) production of vehicles and/or produced vehicles available at: ending-balance-of-Inventory in April =-$8,000-x-375 units of budgeted (planned) production of vehicles and/or produced vehicles available at ending balance of Inventory in April =-$3,000,000. Completed V$3,000,000 is the-Total-Variable-Manufacturing Cost. Completed 1 Cost-of goods available for sale:( 1 $400.000 -is the Beginning Inventory and/or dollar value for the 50 number of vehicles at the beginning balance of Work-in-Process-Inventory. I V$3,000,000 is the Total-Variable-Manufacturing Cost. Cost-of goods available for sale Formula 1 =Dollar value of units at:Beginning balance-of-Work-in-Process-Inventory (Beginning Inventory) +-Total Variable-Manufacturing Cost 1 =-Cost-of goods available for sale = $400,000+ $3,000,000 1 =-$3,400,000- Completed $3,400,000-is the Cost of goods available for sale. Ending Inventory (Ending balance of account called-Inventory) *50 number of vehicles (units) at the beginning balance of Work-in-Process Inventory." $400,000-is-the-dollar value for the-50 number of vehicles at the beginning balance of Work-in- Process-Inventory. I *375 units of budgeted (planned) production of vehicles *400 units of sold vehicles *$8,000 is the-Variable (Manufacturing cost per unit produced). =-WIP-inventory+Production - Sales =-50 units +375 units of budgeted production of vehicles --400 units of sold vehicles = 425 units of budgeted production of vehicles --400 units of sold vehicles 1 =-25 vehicles =-25 vehicles-x-$8,000 Variable (Manufacturing cost per unit produced) =-$200,000- Completed $200.000 is the Ending Inventory (Ending balance of account called Inventory). Variable Cost-of goods sold-Formular 1 = Beginning inventory+Total-Variable-Manufacturing Cost-Ending Inventory =-Variable Cost-of goods sold (Total:Variable Cost of goods sold) 1 $400,000 -is the Beginning Inventory and/or dollar value for the-50-number of vehicles at the beginning balance of Work-in-Process-Inventory. 1 V$3,000,000 is the-Total-Variable-Manufacturing Cost. 1 $200.000 -is Ending Inventory (Ending balance of account called Inventory). I =-$400,000+ $3,000,000-$200,000 1 =-$3,400,000-$200,000 1 =-$3,200.000- Completed V$3,200.000-is the Variable-Cost of goods sold (Total-Variable Cost of goods sold). Variable marketing costs-(Total (Variable-Operating Costs): 1 1 *$3,200-is the Variable-(Operating (Marketing) cost per unit sold). I *400 units of finished goods inventory of vehicles sold in-May Total-Variable marketing costs (Total (Variable Operating Costs) Formula =-Variable (Operating (Marketing) cost per unit sold)-> Total-budgeted sales and actual sales of units of vehicles = Total Variable marketing costs 1 = $3,200-x-4001 = $1,280,000. Completed $1,280,000 -is the Total Variable marketing costs (Total (Variable Operating Costs)). Contribution-Margin: Total Contribution-Margin-Formula [Revenues-- (Variable-Manufacturing Cost-Ending Inventory+-Variable Operating Costs)] =-Contribution-Margin (Total Contribution-Margin) $8.400.000 is the Budgeted (Planned)-Net (Total) Sales Revenue. *$3,000,000 is the-Total Variable-Manufacturing Cost $200,000-is-Ending-Inventory (Ending balance of account called Inventory). V$1.280.000-is the-Total-Variable marketing costs (Total (Variable Operating Costs)). I =[$8.400,000-($3,000,000-$200.000+ $1,280,000)]1 =[$8.400,000-($2,800,000+ $1,280,000)]1 = [$8,400,000-$4,080,000]