Ex 21-2

EX 21-2 Income statements income statements under absorption costing and variable costing Obj. 1 Gallatin 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 the results for July: $2,600,000 Sales (4,000 units) ... Production costs (4,350 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..... $1,218,000 522,000 87,000 130,500 1,957,500 $ 60,000 25,000 85,000 a. Prepare an income statement according to the absorption costing concept. b. Prepare an income statement according to the variable costing concept. - What is the reason for the difference in the amount of operating income reported in (a) and (b)