Please help!! Variable and absorption costing, explaining operating-income diffe
ID: 2499409 • Letter: P
Question
Please help!!
Variable and absorption costing, explaining operating-income differences.Amazing Screen Corporation manufactures and sells 50-inch television sets and uses standard costing. Actual data relating to January, Feburary, and March 2014 are as follows:
The sellig price per unit is $2,800. The budgeted level of production used to calculate the budgeted fixed manufacturing cost per unit is 1,000 units. There are no price, efficency, or spending variances. Any productin0volume variance is written off to cost of goods sold in the month in which it occurs.
1. Prepare income statements for Amazing Screen in January, February, and March 2014 under (a) variable costing and (b) absoption costing
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 explination of the difference between operating income for each month under variable costing and absorption costing.
Absorption--Costing operating income ---- Variable Costing operating income = ______ - ______
Jan _______ - _______ = __________ - ___________
Feb
March
The Difference between absoprtion and variable costing is due soley to moving _____ into inventories as inventories ____ and out of inventories as they ____
Unit data JAN FEB MARCH Begininng inventory 0 150 150 Production 1000 925 1040 Sales 850 925 1055 Variable Costs Maufaturing cost per unit produced 750 750 750 Operating (marketing) cost per unit sold 625 625 625 Fixed Costs Maufacturing costs 390000 390000 390000 Operating (marketing) costs 180000 180000 180000Explanation / Answer
a) Variable costing
Absortion costing
difference
absortion costing income - variable costing income = ending invenotry fixed - beginning inventory
Jan $58,500 = 390*150 - 0 equals $58,500
feb $0 = 0 - $0
march -5850 = - 5850 ( 52650 - 58500)
Fixed maufacturing cost ..........increase......................decrease
Jan Feb March Revenue $2,380,000 $2,590,000 $2,954,000 Beginning inventory $0 $112,500 $112,500 Variable manufacturing cost @750 750,000 693,750 780,000 COGS 750,000 806,250 892,500 less:Ending inventory (112,500) (112,500) (101,250) Variable COGS $637,500 $693,750 $791,250 Varaible operating cost $531,250 $578,125 $659,375 Total variable cost $1,168,750 $1,271,875 $1450,625 Contribution margin $1211,250 $1318,125 $1503,375 less:Fixed manufacturing cost (390,000) (390,000) (390,000) Fixed operating cost (180,000) (180,000) (180,000) Operating income $641,250 $748,125 $933,375