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TC Motors assembles and sells motor vehicles, and uses standard costing. Actual data relating to April and May 2015 are
April May
Unit data:
Beginning inventory…………………………………..0…………..150
Production………………………………………….500…………..400
Sales…………………………………………………350………….520
Variable costs:
Manufacturing cost per unit produced…………$ 10,000……$ 10,000
Operating (marketing) cost per unit sold………..$ 3,000…….$ 3,000
Fixed costs:
Manufacturing costs…………………………$2,000,000..$2,000,000
Operating (marketing) costs…………………..$ 600,000…$ 600,000
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 production- volume variance is written off to cost of goods sold in the month in which it occurs.
Required
1. Prepare April and May 2015 statements of comprehensive income for TC 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.
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