Question

Big Screen Corporation manufactures as well as sells 50-inch television

Big Screen Corporation manufactures as well as sells 50-inch television sets and uses standard costing. Actual data relating to January and February and March of 2012 are as follows

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 effectiveness or else spending variances. Any production-volume variance is canceled to cost of goods sold in the month in which it occurs

1. Prepare income statements for Big Screen in January and February and March of 2012 under (a) variable costing and (b) absorption costing

2. Explain the difference in operating income for January and February and March under variable costing and absorption costing