Question #1
Consider the following information:
|
|
Q1
|
Q2
|
Q3
|
|
Beginning inventory (units)
|
0
|
2,000
|
1,000
|
|
Budgeted units to be produced
|
300,000
|
300,000
|
300,000
|
|
Actual units produced
|
296,000
|
301,000
|
302,000
|
|
Units sold
|
294,000
|
302,000
|
302,000
|
|
Variable manufacturing costs per unit produced
|
$40
|
$40
|
$40
|
|
Variable selling costs per unit sold
|
$10
|
$10
|
$10
|
|
Fixed manufacturing costs
|
$3,000,000
|
$3,000,000
|
$3,000,000
|
|
Fixed selling costs
|
$1,000,000
|
$1,000,000
|
$1,000,000
|
|
Selling price per unit
|
$70
|
$70
|
$70
|
There are no price, efficiency, or spending variances, and any production-volume variance is directly written off to cost of goods in the quarter in which it occurs.
a) Prepare income statements for Q1, Q2, and Q3 using variable costing and absorption costing.
b) Explain the differences in operating income between the two costing systems for each quarter. Be specific!