Question
Variable and absorption costing, explaining operating-income differences. Nascar Motors assembles and sells motor vehicles and uses standard costing. Actual data relating to April and May
Variable and absorption costing, explaining operating-income differences. Nascar Motors assembles and sells motor vehicles and uses standard costing. Actual data relating to April and May 2017 are as follows:
The selling price per vehicle is $24,000. 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.
Required:
Prepare April and May 2017 income statements for Nascar 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.
\begin{tabular}{|r|l|r|r|r|} \hline \multicolumn{1}{|c|}{ Insert Page Layout } & \multicolumn{1}{c}{ Formulas } & \multicolumn{2}{c|}{ Data } & \multicolumn{2}{c|}{ Review } \\ \hline 1 & \multicolumn{1}{|c|}{ A } & B & C & D \\ \hline 1 & & April & & May \\ \hline 2 & Unit data: & & & \\ \hline 3 & Beginning inventory & 0 & & 150 \\ \hline 4 & Production & 500 & & 400 \\ \hline 5 & Sales & 350 & & 520 \\ \hline 6 & Variable costs: & & & \\ \hline 7 & Manufacturing cost per unit produced & $10,000 & & $10,000 \\ \hline 8 & Operating (marketing) cost per unit sold & 3,000 & & 3,000 \\ \hline 9 & Fixed costs: & & & \\ \hline 10 & Manufacturing costs & $2,000,000 & & $2,000,000 \\ \hline 11 & Operating (marketing) costs & 600,000 & & 600,000 \\ \hline \end{tabular}Step by Step Solution
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