Champion Motors assembles and sells motor vehicles and uses standard costing. Ac

Question

Champion Motors assembles and sells motor vehicles and uses standard costing. Actual data relating to April and May 2017 are as follows Click the icon to view the data.) The selling price per vehicle is $27,000. The budgeted level of production used to calculate the budgeted fixed manufacturing cost per unit is 400 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. Read the requirements.

Explanation / Answer

Calculation of operating profit based on marginal costing;

Particulars                                        April2017     May2017

Revenue                                            6750000      13095000

Less:

Cost of goods sold:

Add:Beginning inventory                  0                  1650000

Add:Variable manufacturing cost 4400000        4125000

Less: closing inventory    7150000     7810000

ADD:Variable selling cost 900000     1746000

                                                     -----------         -------------

Contribution                                8600000          15130000

Less:

Fixed manufacturing cost          2400000             2400000

Fixed selling cost                        675000                675000

                                                  ------------              -------------

                                                    5525000             12055000

Net operating income               

                                                   -------------- ----------------------

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