Question

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.

umumiy vandles. Any production goods sold in the month in which it occurs. Read the requirements in January, February, and M 0 Data Table ebruary, and March of 2017 month first, then complete the January February anuary 2017 March Unit data: Beginning inventory Production 150 150 1,475 1,475 1,500 1,350 Sales 1,575 1,600 750 Variable costs Manufacturing cost per unit produced Operating (marketing) cost per unit sold Fixed costs Manufacturing costs Operating (marketing) costs 750 $ 750 $ 750 S 750 $ $ 750 $ $ 525,000 $ 160,000 $ 525,000 $ 160,000 $ 525,000 160,000 elds and then click Ched Print Done Clear All

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 TV Plus in January, February, and March 2017 under (a) variable costing and (b( absorption costing.
2. Explain the difference in operating income for Januray, February, and March under variable cksting and absorption costing.

Answer 1

solution as per Below Image:

Income Statement as per Variable Costing January 2970000 February 3245000 Amount in $ March 3520000 Particulars A) Sales( $ 2200 per Unit) Costs: Variable Manufacturing Cost ($750 per Unit produced) Less: Closing Stock 1125000 112500 (750 X 150) Add: Opening Stock Variable Production Cost Add:Variable Marketing Cost ($ 750 per Unit Sold) B) Total Variable Cost of Sales C) Contribution Margin( A-B) Fixed Manufacturing cost Fixed marketing Cost D) Total Fixed Cost F) Net Income (C-D) 1012500 1012500 2025000 945000 525000 160000 685000 260000 1106250 112500 (750 X 150) 112500 1106250 1106250 2212500 1032500 525000 160000 685000 347500 1181250 112500 (750 X 150) 112500 1181250 1200000 2381250 1138750 525000 160000 685000 453750 Income Statement as per absorption Costing January 2970000 February 3245000 Amount in $ March 3520000 Particulars A) Sales( $ 2200 per Unit) Production Costs: Variable Manufacturing Cost ($750 per Unit produced) Fixed Manufacturing Cost ( $ 350 Per Unit Produced) Total Production Cost Add: Opening Stock Less: Closing Stock 1125000 1106250 1181250 525000 516250 551250 1650000 1622500 1732500 165000 165000 165000 165000 165000 (1650000/1500)X 150 |(1622500/1475)X 150 (1732500/1575) X 150 1485000 1622500 1732500 1012500 1106250 1200000 160000 160000 160000 1172500 1266250 1360000 312500 356250 427500 B) Net Production Cost Variable Marketing Expenses ( $ 750 per unit Sold) Fixed Marketing Expenses C) Total Selling & Admin Expenses D) Net Income ( A-B-C) Fixed Manufacturing Cost Absorption Rate = $ 525000/1500 = $ 350 per Unit

Explanation for Difference In Profit January 312500 Particulars Profit As Per Absorption Costing System Add: Opening Stock Under Valued Under Variable Costing February 356250 52500 Amount in $ March 427500 52500 52500 52500 52500 (165000-112500) Less: Closing Stock Under Valued Under Variable costing Less: Underabsorption of Fixed Manufacturing Cost Under absorption Costing Add: Underabsorption of Fixed Manufacturing Cost Under absorption Costing Profit As per Variable Costing 8750 (525000-516250) 26250 (551250-525000) 453750 260000 347500