Question:
Variable and absorption costing, explaining operating-income differences. Crystal Clear Corporation manufactures and sells 50-ince television sets and uses standard costing. Actual data relating to January, Feburary, and March 2014 are as follows:
|
Unit data
|
|
|
|
|
Begininng inventory
|
0
|
100
|
100
|
|
Production
|
1,400
|
1,375
|
1,430
|
|
Sales
|
1,300
|
1,375
|
1,455
|
|
Variable Costs
|
|
|
|
|
Maufaturing cost per unit produced
|
950
|
950
|
950
|
|
Operating (marketing) cost per unit sold
|
725
|
725
|
725
|
|
Fixed Costs
|
|
|
|
|
Maufacturing costs
|
490,000
|
490,000
|
490,000
|
|
Operating (marketing) costs
|
120,000
|
120,000
|
120,000
|
The sellig price per unit is $3,500. The budgeted level of production used to calculate the budgeted fixed manufacturing cost per unit is 1,400 units. There are no price, efficency, or spending variances. Any productin0volume variance is written off to cost of goods sold in the month in which it occurs.
1. Prepare income statements for Crystal Clear in January, February, and March 2014 under (a) variable costing and (b) absoption costing
2. Explain the difference in operating income for January, February, and March under variable costing and absorption costing.