Nascar Motors assembles and sells motor vehicles and uses standard costing. Actual data relating to April and May 2008 are:

The selling price per vehicle is $24,000. The budgeted level of production used to calculate the bud; fixed manufacturing cost per unit is 500 units. There are no price efficiency, or spending variances. Any production-volume variance is written off to cost of goods sold in the month in which it occurs. If you want to use Excel to solve this exercise, go to the Excel Lab at www.prenhall.com/hornqren/costl3e and download the template for Exercise 9-16.

1.         Prepare April and May 2008 income statements for Nascar Motors under 

   (a)     Variable costing and 

  (b)     Absorption costing.

2.         Prepare a numerical reconciliation and explanation of the difference between operating income each month under variable costing and absorption costing.

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April May 2 Unit data 3 Beginning Inventory 150 500 4 Production 400 5 Sales 350 520 Variable costs 10,000 Manufacturing cost per unit produced 10,000 Operating (marketing) cost per unit sold 3,000 3,000 Fixed costs $2,000,000 $2,000,000 10 Manufacturing costs Operating (marketing) costs 600,000 11 600,000