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.
