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f[1. Prepare an income statement according to the variable costing concept. Gallatin County Motors Inc. Variable Costing Income Statement For the Month Ended July 31
\f[1. 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 v J Variable cost of goods so v J Manufacturing margir v J Variable selling and administrative exg v J Contribution margirv J UiUUiDU Fixed costs: Fixed fatten; overhead cos ' J E Fixed selling and administrative exEs v J C] Total fixed costs v J Oberating income v J ibib Feedback V Check My Wm b. Under variable costing, the cost of goods manufactured includes only variable manufacturing costs. 1:. What is the reason for the difference in the amount of operating income reported in (a) and (in)? Under the absorgtion costin V ti method, the fixed manufacturing cost included in the cost of goods sold is matched with the revenues. Under variable cnstinr v J , all of the fixed manufacturing cost is deducted in the period in which it is incurred, regardless of the amount ofinventory change. Thus, when inventory increases, the absorption costin - J income statement will have a higher uperating income
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