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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 1 and operated at 100% of capacity during the first month. The following data summarize the results for July:
Sales (4,000 units) $2,600,000
Production costs (4,350 units):
Direct materials $1,218,000
Direct labor 522,000
Variable factory overhead 87,000
Fixed factory overhead 130,5001,957,500
Selling and administrative expenses:
Variable selling and administrative expenses $60,000
Fixed selling and administrative expenses 25,00085,000
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 31
Sales
$Sales
Cost of goods sold
Cost of goods sold
Gross profit
$Gross profit
Selling and administrative expenses
Selling and administrative expenses
Operating income
$Operating income
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a. Under absorption costing, the cost of goods manufactured includes direct materials, direct labor, and factory overhead costs. Both fixed and variable factory costs are included as part of factory overhead.
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 31
Sales
$Sales
Variable cost of goods sold
Variable cost of goods sold
Manufacturing margin
$Manufacturing margin
Variable selling and administrative expenses
Variable selling and administrative expenses
Contribution margin
$Contribution margin
Fixed costs:
Fixed factory overhead costs
$Fixed factory overhead costs
Fixed selling and administrative expenses
Fixed selling and administrative expenses
blank
Total fixed costs
Total fixed costs
Operating income
$Operating income

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