Prepare income statements for using variable costing

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Reference no: EM132491474

Consider the following information:

Beginning inventory (units) Budgeted units to be produced Actual units produced

Q1 0 300,000 296,000

Q2 2,000 300,000 301,000

Q3 1,000 300,000 302,000

Units sold Variable manufacturing costs per unit produced Variable selling costs per unit sold

294,000 $40 $10

302,000 $40 $10

Fixed manufacturing costs Fixed selling costs Selling price per unit

$3,000,000 $1,000,000 $70

There are no price, efficiency, or spending variances, and any production-volume variance is directly written off to cost of goods in the quarter in which it occurs.

Question a) Prepare income statements for Q1, Q2, and Q3 using variable costing and absorption costing.

Question b) Explain the differences in operating income between the two costing systems for each quarter.

Reference no: EM132491474

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