Question

Accelerate Motors assembles and sells motor vehicles and uses standard costing. Actual data relating to April and May 2017 are as follows: E: (Click the icon to view the data.) The selling price per vehicle is $28,000. The budgeted level of production used to calculate the budgeted fixed manufacturing cost per unit is 600 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.

Answer 1

Answer-1(a):

INCOME STATEMENT Under Variable Costing April 14,000,000 May 16,800,000 $ $ Sales Cost of goods sold: Beginning inventory Cost of goods produced Cost of goods available for sale Less: Ending inventory Cost of goods sold Less: Variable non-manufacturing cost Contribution Margin Less: Fixed cost: Manufacturing cost Non-manufacturing cost Operating income 4,800,000 4,800,000 800,000 4,000,000 1,900,000 8,100,000 800,000 4400000 5,200,000 400,000 4,800,000 2,280,000 9,720,000 2,400,000 500,000 5,200,000 2,400,000 500,000 6,820,000 $

Answer-1(b):

INCOME STATEMENT Under Absorption Costing April 14,000,000 $ May 16,800,000 $ 7,200,000 7,200,000 1,200,000 6,000,000 Sales Cost of goods sold: Beginning inventory Cost of goods produced Cost of goods available for sale Less: Ending inventory Cost of goods sold Less: Unfavourable production volume variance Adjusted Cost of goods sold Gross Margin Less: Operating (Marketing) costs: Variable Fixed Operating income 1,200,000 6,600,000 7,800,000 600,000 7,200,000 200,000 7,000,000 9,800,000 6,000,000 8,000,000 Ś $ 2,280,000 JS 1,900,000 500,000 $ 5,600,000 $ $ 7,020,000

Answer-2:

RECONCILIATION OF DIFFERENCE IN OPERATING PROFIT UNDER BOTH METHOD April May Change in inventory in units 100 50 Fixed overhead rate $ 4,000 $ 4,000 Difference in net income $ 400,000 $ 200,000