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come Statements under Absorption Costing and Variable Costing latin County Motors Inc. assembles and sells snowmobile engines. The company began operations on July 1
come Statements under Absorption Costing and Variable Costing latin County Motors Inc. assembles and sells snowmobile engines. The company began operations on July 1 and operated at 100% of capacity during the first month. The following data summarize e results for July: Sales (16,000 units) Production costs (21,000 units): Direct materials Direct labor Variable factory overhead Fixed factory overhead Selling and administrative expenses: Variable selling and administrative expenses Fixed selling and administrative expenses $777,000 373,000 186,900 $1,600,000 123,900 1,461,600 $226,500 If required, round interim per-unit calculations to the nearest cent 87,700 314,200 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 Cost of goods sold Gross Profit Selling Administrative Expenses Operating Income 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. b. Prepare an income statement according to the vanable costing concept. Fixed costs Feb Gallatin County Motors Inc. Variable Costing Income Statement For the Month Ended July 31 Sales $ Variable Cast of Goods -manufacturing Margin Variable Seling. Contribution margir +dmin Expenses Fixed Factory Overhead Costs -Fixed Selli + Admin. Expenses Total Fixed casts Operating Invane b. Under variable costing, the cost of goods manufactured includes only variable manufacturing costs c. What is the reason for the difference in the amount of operating income reported in (a) and (b)? Under the ded in the cost of goods sold is matched with the revenues. Under all of the fixed manufacturin income statement will have a
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