TV Plus Corporation manufactures and sells 50-inch television sets and uses standard costing. Actual data relating to January, February, and March 2020 are as follows:

Data Table

	January	February	March
Unit data:
Beginning inventory	0	150	150
Production	1,300	1,250	1,360
Sales	1,150	1,250	1,370
Variable costs:
Manufacturing cost per unit produced	$700	$700	$700
Operating (marketing) cost per unit sold	$575	$575	$575
Fixed costs:
Manufacturing costs	$533,000	$533,000	$533,000
Operating (marketing) costs	$110,000	$110,000	$110,000

The selling price per unit is $3,600. The budgeted level of production used to calculate the budgeted fixed manufacturing cost per unit is

1,300 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.

(a). Prepare income statements for TV Plus 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				$?		$?		$?
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				?		?		?

Fixed manufacturing costs				?		?		?
Fixed operating costs				?		?		?
Operating income				$?		$?		$?

(b). Prepare income statements for TV Plus 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 "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. Abbreviation used; Adj. = Adjustment, Mfg. = Manufacturing.)

			January 2020			February 2020			March 2020
Revenues					$?			$?			$?
Cost of goods sold:
	Beginning inventory		$?			$?			$?
	Variable manufacturing costs		?			?			?
	Allocated fixed manufacturing costs		?			?			?
	Cost of goods available for sale		?			?			?
	Deduct ending inventory		(?)			(?)			(?)
	Adj. for production-volume variance		?			?	U		(?) .	F
	Cost of goods sold				?			?			?
Gross margin					?			?			?

	Variable operating costs				?			?			?
	Fixed operating costs				?			?			?
Operating income					$?			$?			$?

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 operating income	-	Variable-costing operating income	=	Fixed mfg costs in end. inventory	-	Fixed mfg costs in beg. inventory

Jan

$?

-

$?

=

$?

-

$0

Feb

$?

-

$?

=

$?

-

$?

Mar

$?

-

$?

=

$?

-

$?

The difference between absorption and variable costing is due solely to moving fixed manufacturing costs into inventories as inventories

increase and out of inventories as they decrease

.