題組內容

(1) STARK bought a 2,000-acre land for $8,215,300 and divided it into 200 equal size lots. As the lots are sold, they are cleared at an average cost of $5,210. Storm drains and driveways are installed at an average cost of $8,000 per site. Sales commissions are 10% of selling price. Administrative costs are $850,000 per year. The average selling price was $160,000 per lot during 2019 when 50 lots were sold. During 2020, STARK bought another 2,000-acre land and developed it exactly the same way. Lot sales in 2020 totaled 300 with an average selling price of $160,000. All costs were the same as in 2019. Compute the operating income for both years using both absorption and variable costing methods (Show computations). Explain why operating income is (or not) the same under the two costing methods in 2019 and 2020, respectively. (8%)