BigScreen Corporation manufactures and sells 50-inch television sets and uses standard costing. Actual data relating to January, February, and March of 2009 are:

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 2009 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.

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January February March Unit data Beginning inventory 300 300 Production 1,000 800 1,250 1,500 Sales 700 800 Variable costs $900 $900 Manufacturing cost per unit produced Operating (marketing) cost per unit sold $900 $600 $600 $600 Fixed costs S400,000 $400,000 Manufacturing costs Operating (marketing) costs $400,000 $140,000 S140,000 $140,000