Question: Variable and absorption costing, explaining operating-income differences. EntertainMe Corporation manufactures and sells 50-inch television sets and uses standard costing. Actual data relating to January, February, and March 2017 are as follows
The selling price per unit is $3,300. 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 of goods sold in the month in which it occurs.
1. Prepare income statements for EntertainMe in January, February, and March 2017 under (a) variable costing and (b) absorption costing.
2. Explain the difference in operating income for January, February, and March under variable costing and absorption costing.