Question
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
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:
1 | Sales (31,000 units) |
| $7,750,000.00 |
2 | Production costs (38,000 units): |
|
|
3 | Direct materials | $3,040,000.00 |
|
4 | Direct labor | 1,710,000.00 |
|
5 | Variable factory overhead | 950,000.00 |
|
6 | Fixed factory overhead | 570,000.00 | 6,270,000.00 |
7 | Selling and administrative expenses: |
|
|
8 | Variable selling and administrative expenses | $1,120,000.00 |
|
9 | Fixed selling and administrative expenses | 200,000.00 | 1,320,000.00 |
Required: | |||
a. | Prepare an income statement according to the absorption costing concept.* | ||
b. | Prepare an income statement according to the variable costing concept.* | ||
c. | What is the reason for the difference in the amount of Operating income reported in (a) and (b)?
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started