a$.$  Prepare an income statement according to the absorption costing concept.

Gallatin County Motors Inc.

Absorption Costing Income Statement

For the Month Ended July $31$

Sales

$Sales

$1,885,000$

Cost of goods sold

Cost of goods sold

$1,310,800$

Gross profit

$Gross profit

$574,200$

Selling and administrative expenses

Selling and administrative expenses

$369,300$

Operating income

$Operating income

$204,900$

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a$.$ Under absorption costing, the cost of goods manufactured includes direct materials, direct labor, and factory overhead costs. Both fixed and variable factory costs are included as part of factory overhead.

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b$.$  Prepare an income statement according to the variable costing concept.

Gallatin County Motors Inc.

Variable Costing Income Statement

For the Month Ended July $31$

Sales

$Sales

$1,885,000$

Variable cost of goods sold

Variable cost of goods sold

Manufacturing margin

$Manufacturing margin

Variable selling and administrative expenses

Variable selling and administrative expenses

Contribution margin

$Contribution margin

Fixed costs:

Fixed factory overhead costs

$Fixed factory overhead costs

Fixed selling and administrative expenses

Fixed selling and administrative expenses

Total fixed costs

Total fixed costs

Operating income

$Operating income

Answer rating: 100% (QA)

Heres the income statement prepared according to the variable costing concept Gallatin County Motors ... View the full answer