Assume that Security uses throughput costing. (Refer to Problem 15.45)
Problem 15.45
Security Vehicles converts SUVs into luxury, high security vehicles by adding a computerized alarm and radar system and various luxury components. The finished vehicles are sold for $100,000 each. Variable production costs (including the cost of the basic SUV) are about $60,000 per vehicle. Fixed production costs are $60,000 per month. The fixed costs for administrative and selling expenses are $20,000 per month plus $5,000 per vehicle sold.
At the beginning of last year, Security had no inventories of finished vehicles. In January, it produced four vehicles and sold three. In February, it produced five and sold six.
REQUIRED
A. What is the operating income for January if Security uses throughput costing? Assume direct materials are $50,000 per vehicle.
B. Reconcile the difference between the variable and throughput costing incomes in February. (The variable costing income is calculated in Problem 15.45).
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