Prepare a numerical reconciliation and explanation

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Reference no: EM131770732

Question: 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 $27000. 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.

Unit data April May

Beginning Inventory 0 100

Production 500 425

Sales 400 495

Variable Costs

Manufacturing cost/unit produced $11000 $11000

Operating (marketing) cost/unit sold 3200 3200

Fixed costs

Manufacturing costs $2000000 $2000000

Operating (marketing) costs 550000 550000

Reference no: EM131770732

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