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Gallatin County Motors Inc. assembles and sells snowmobile engines. The company began operations on July 1 and operated at 1 0 0 % of capacity
Gallatin County Motors Inc. assembles and sells snowmobile engines. The company began operations on July and operated at of capacity during the first month. The following data summarize the results for July:
Sales units $
Production costs 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
If required, round interim perunit calculations to the nearest cent.
Question Content Area
a Prepare an income statement according to the absorption costing concept.
Gallatin County Motors Inc.
Absorption Costing Income Statement
For the Month Ended July
$ Select
Select
$ Select
Select
$ Select
Question Content Area
b Prepare an income statement according to the variable costing concept.
Gallatin County Motors Inc.
Variable Costing Income Statement
For the Month Ended July
$ Select
Select
$ Select
Select
$ Select
Fixed costs:
$ Select
Select
Select
$ Select
Question Content Area
c What is the reason for the difference in the amount of operating income reported in a and b
Under the
method, the fixed manufacturing cost included in the cost of goods sold is matched with the revenues. Under
all of the fixed manufacturing cost is deducted in the period in which it is incurred, regardless of the amount of inventory change. Thus, when inventory increases, the
income statement will have a higher operating income.
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