BigScreen Corporation manufactures and sells 50-inch television
BigScreen Corporation manufactures and sells 50-inch television sets and uses standard costing. Actual data relating to January, February, and March of 2012 are as follows (see attachment):
The selling price per unit is $2,500. The budgeted level of production used to calculate the budgeted fixed manufacturing cost per unit is 1,000 units. There are no price, efficiency, or spending variances. Any production-volume variance is written oft to cost of goods sold in the month in which it occurs.
1. Prepare income statements for BigScreen in January, February, and March of 2012 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.