Question
Frigid Motors Inc. assembles and sells snowmobile engines. The company began operations on July 1, 2016, and operated at 100% of capacity during the first
Frigid Motors Inc. assembles and sells snowmobile engines. The company began operations on July 1, 2016, and operated at 100% of capacity during the first month. The following data summarize the results for July:
1 | Sales (35,000 units) |
| $8,750,000.00 |
2 | Production costs (42,500 units): |
|
|
3 | Direct materials | $4,250,000.00 |
|
4 | Direct labor | 2,125,000.00 |
|
5 | Variable factory overhead | 1,062,500.00 |
|
6 | Fixed factory overhead | 637,500.00 | 8,075,000.00 |
7 | Selling and administrative expenses: |
|
|
8 | Variable selling and administrative expenses | $1,150,000.00 |
|
9 | Fixed selling and administrative expenses | 200,000.00 | 1,350,000.00 |
Required: | |||
A. | Prepare an income statement according to the absorption costing concept.* | ||
B. | Prepare an income statement according to the variable costing concept. A colon (:) will automatically appear if it is required.* | ||
C. | What is the reason for the difference in the amount of income from operations reported in (A) and (B)?
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