Zippy Motors assembles and sells motor vehicles and uses standard
Zippy Motors assembles and sells motor vehicles, and uses standard costing. Actual data relating to April and May 2012 are
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 2012 income statements for Zippy 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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