Fast Track motors assembles and sells motor vehicles and uses standard costing. Actual data relating to April and May 2017 are as follows:
April May
Unit data:
Beginning inventory 0 100
Production 700 650
Sales 600 700
Variable costs:
Manufacturing cost per unit produced $9,500 $9,500
Operating (marketing) cost per unit sold $2,400 $2,400
Fixed costs:
Manufacturing costs $2,100,000 $2,100,000
Operating (marketing) costs $650,000 $650,000
The selling price per vehicle is $27,000.
The budgeted level of production used to calculate the budgeted fixed manufacturing cost per unit is 70 units.
There are no price, efficiency or spending variances.
Any production- volume variance is writtin off to cost of goods sold in the month in which it occurs.
Required:
1) Prepare April and May income statements under variable costing.
April May
Revenues
Variable cost of goods sold
Beginning inventory
Variable manufacturing costs
Cost of goods available for sale
Deduct ending inventory
Variable cost of goods sold
Variable operating costs
Contribution margin
Fixed manufacturing costs
Fixed operating costs
Operating income
2) Prepare April and May under absorption costing.
April May
Revenues
Cost of goods sold
Beginning inventory
Variable manufacturing costs
Fixed manufacturing costs
Cost of goods available for sale
Deduct ending inventory
Adjustment for production-volume variance
Gross margin
Operating income