Jungle Gyms Unlimited makes backyard playsets. The playsets are sold for $450 each. Variable production costs are about $150 per playset. Fixed production costs are $5,000 per month. The fixed costs for administrative and selling expenses are $2,000 per month plus $25 per playset sold. At the beginning of April, Jungle Gym’s had 10 playsets in inventory with a total production cost of $2,750. In April, it produced 50 playsets and sold 45. In May, it produced 50 playsets and sold 60.

Required:

A. What is the operating income for April and May if Jungle Gym uses a variable costing system?

B. What is the operating income for April and May if Jungle Gym uses an absorption costing system?

C. Reconcile the difference between the absorption and variable costing operating incomes in April and May.

D. Explain why Jungle Gym might produce both variable and absorption income statements for the same time period.