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9-21 Variable and absorption costing, explaining operating-income differences. Nascar Motors assembles and sells motor vehicles and uses...

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Accounting

9-21 Variable and absorption costing, explainingoperating-income differences. Nascar Motors assembles and sellsmotor vehicles and uses standard costing. Actual data relating toApril and May 2017 are as follows:

   April May

Unit Data:

Beginning Inventory 0    150

Production    500    400

sales 350    520

Variable Costs

Manufacturing cost per unit produced    $10,000$10,000

Operating cost per unit sold 3000    3000

Fixed Costs

Manufacturing Costs    $2,000,000   $2,000,000

Operating Costs    600,000    600,000

9.5-31 Full Alternative Text

The selling price per vehicle is $24,000. The budgeted level ofproduction used to calculate the budgeted fixed manufacturing costper unit is 500 units. There are no price, efficiency, or spendingvariances. Any production-volume variance is written off to cost ofgoods sold in the month in which it occurs.

Prepare April and May 2017 income statements for Nascar Motorsunder (a) variable costing and (b) absorption costing.

Prepare a numerical reconciliation and explanation of thedifference between operating income for each month under variablecosting and absorption costing.

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