Solution of the above question is as under:
A) Income Statement for April 2017 And May 2017: | ||||||
a) Absorption Costing Income Statement | ||||||
Race Track Motors | ||||||
Income Statement (Absorption Costing) | ||||||
Apr-17 | May-17 | |||||
Particulars | Amount($) | Amount($) | ||||
Sales(450 Units * $30000)//(420 Units * $30000) | 13500000 | 12600000 | ||||
Less: Cost of Goods Sold: | ||||||
Opening Inventory (0 Units * $15400^)//(50 Units * $16500^^) | 0 | 825000 | ||||
Add: Cost of Goods Produced(500 Units * $15400)//(400 Units * $16500) | 7700000 | 6600000 | ||||
Cost of Goods Available for Sale | 7700000 | 7425000 | ||||
Less: Closing Inventory(50 Units*$15400)//(30 Units*$16500) | 770000 | 6930000 | 495000 | 6930000 | ||
Gross Profit | 6570000 | 5670000 | ||||
Less: Selling and Administration Expenses | ||||||
Variable Selling and Administration Expenses(450 Units*$2000)//(420 Units*$2000) | 900000 | 840000 | ||||
Fixed Selling and Administration Expenses | 750000 | 1650000 | 750000 | 1590000 | ||
Net Operating Income | 4920000 | 4080000 | ||||
^ Manufacturing Expenses per Unit | ^^ Manufacturing Expenses per Unit | |||||
Variable Expenses + Fixed Manufacturing Overhead Expenses | Variable Expenses + Fixed Manufacturing Overhead Expenses | |||||
$11000 + ($2200000/500 Units) | $11000 + ($2200000/400 Units) | |||||
$11000 + $4400 | $11000 + $5500 | |||||
$15,400 | $16,500 | |||||
b) Variable Costing Income Statement | ||||||
Race Track Motors | ||||||
Income Statement (Variable Costing) | ||||||
Apr-17 | May-17 | |||||
Particulars | Amount($) | Amount($) | ||||
Sales(450 Units * $30000)//(420 Units * $30000) | 13500000 | 12600000 | ||||
Less: Cost of Goods Sold: | ||||||
Opening Inventory (0 Units * $11000)//(50 Units * $11000) | 0 | 550000 | ||||
Add: Cost of Goods Produced(500 Units * $11000)//(400 Units * $11000) | 5500000 | 4400000 | ||||
Variable Cost of Goods Available for Sale | 5500000 | 4950000 | ||||
Less: Closing Inventory(50 Units*$11000)//(30 Units*$11000) | 550000 | 4950000 | 330000 | 4620000 | ||
Gross Contribution Margin | 8550000 | 7980000 | ||||
Less: Variable Selling and Administration Expenses (450*$2000)//(420*$2000) | 900000 | 840000 | ||||
Contribution Margin | 7650000 | 7140000 | ||||
Less: Period Expenses | ||||||
Fixed Manufacturing Overheads | 2200000 | 2200000 | ||||
Fixed Selling and Administration Expenses | 750000 | 2950000 | 750000 | 2950000 | ||
Net Operating Income | 4700000 | 4190000 | ||||
Reconciliation to explain the difference between Net Operating Income | ||||||
Apr-17 | May-17 | |||||
Particulars | Amount ($) | Amount ($) | ||||
Net Operating Income under Absorption Costing | 4920000 | 4080000 | ||||
Net Operating Income under Variable Costing | 4700000 | 4190000 | ||||
Difference in Net Operating Income | 220000 | -110000 | ||||
Change in Inventory (Closing - Opening) | 50 Units | 20 Units | ||||
Fixed Manufacturing Overhead Deferred in Inventory (50 Units * $ 4400)/ Fixed Manufacturing Overhead Expenses released from Inventory (20 Units* $5500) |
220000 | -110000 | ||||
Reason for Difference in Net Operating Income
In the Month of April 2017, the net operating income under Absorption Costing is $220000 more than the net operating income under Variable Costing because when production is more than sales, the fixed manufacturing overhead is deferred in Inventory that causes a higher Net Operating Income under Absorption Costing than under Variable Costing.
In the Month of May 2017, the net operating income under Absorption Costing is $110000 less than the net operating income under Variable Costing because when production is less than sales, the fixed manufacturing overhead is released from Inventory that causes a lower Net Operating Income under Absorption Costing than under Variable Costing.
Race Track Motors assembles and sells motor vehicles and uses standard costing Actual data relating to...
Champion Motors assembles and sells motor vehicles and uses standard costing. Actual data relating to April and May 2017 are attached in a photo. The selling price per vehicle is $25,000. The budgeted level of production used to calculate the budgeted fixed manufacturing cost per unit is 400 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. 1. Prepare April and...
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...
Speedy Motors assembles and sells motor vehicles and uses standard costing. Actual data and variable costing and absorption costing income statements relating to April and May 2017 are as follows: The variable manufacturing costs per unit of Speedy Motors are as follows: E. (Click the icon to view the variable manufacturing costs per unit.) 450 April May Unit data: Beginning inventory 50 Production Sales 475 Variable costs: Manufacturing cost per unit produced $ 9,500 $ 9,500 Operating (marketing) cost per...
Nascar Motors assembles and sells motor vehicles and uses standard costing. Actual data and variable costing and absorption costing income statements relating to April and May 2017 are attached in photos. The variable manufacturing cost per unit of Nascar Motors are as follows: April May Direct material cost per unit $6,500 6,500 Direct manufacturing labor cost per unit 1,800 1,800 Manufacturing overhead cost per unit 3,200 3,200 1. Prepare income statements for Nascar Motors in April and May 2017...
Accelerate Motors assembles and sells motor vehicles and uses standard costing. Actual data relating to April and May 2017 are as follows: (Click the icon to view the data.) The selling price per vehicle is $27,000. 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....
E9-22 (similar to) Question Help Champion Motors assembles and sells motor vehicles and uses standard costing Actual data and variable costing and absorption costing income statements relating to April and May 2017 are as follows: The variable manufacturing costs per unit of Champion Motors are as follows E (Click the icon to view the variable manufacturing costs per unit) ad the requirements Data Table - X Requirements April 1. Prepare income statements for Champion Motors in April and May 2017...
Variable and absorptioncosting;explaining operating-incomedifferences.TCMotorsassembles and sells motor vehicles, and uses standard costing. Actual data relating to April and May 2015 are The selling price per vehicle is $24,000. The budgeted level of production used to calculate the budgeted fixed manufacturing cost per unit is 500 units. There are no price, efficiency, or rate variances. Any produc- tion-volume variance is written off to cost of goods sold in the month in which it occurs. Required 1. Prepare April and May 2015...
EXAMPLE OF THE TEMPLATE NEEDED: THANK YOU!! W E9-22 (similar to) Accelerate Motors assembles and sells motor vehicles and uses standard costing. Actual data and variable costing and absorption costing income statements relating to April and May 2017 are as follows: (Click the icon to view the data.) The variable manufacturing costs per unit of Accelerate Motors are as follows: (Click the icon to view the variable manufacturing costs per unit.) (Click the icon to view the variable costing income...
i Requirements 1. Prepare April and May 2017 income statements for FastTrack Motors under (a) variable costing and (b) absorption costing. 2. Prepare a numerical reconciliation and explanation of the difference between operating income for each month under variable costing and absorption costing Print Done FastTrack Motors assembles and sells motor vehicles and uses standard costing. Actual data relating to April and May 2017 are as follows: (Click the icon to view the data.) The selling price per vehicle is...
TV Plus Corporation manufacturers and sells 50-inch television sets and uses standard costing. Actual data relating to January, February, and March 2017 are attached. The selling price per unit is $2,200. The budgeted level of production used to calculate the budgeted fixed manufacturing cost per unit is 1,500 units. There are no price, efficiency, or spending variances. Any production-volume variance is written off to cost if goods sold in the month in which it occurs. 1. Prepare income statements for...