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Income statements under absorption and variable con Gallatin County Motors Inc. assembles and sells snowmobile engines. The company began operations on July 1 and operated

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Income statements under absorption and variable con 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 Muly Sales (5,000 units) $3,400,000 Production costs (5,000 units): Direct materials $1,462,000 Direct labor 628,500 Variable factory overhead 102,500 Fixed factory overhead 161,000 2,354,000 Selling and administrative expenses Variable selling and administrative expenses $73,000 Fored selling and administrative expenses 30,600 103,600 This information has been collected in the Microsoft Excel Online flie. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Open spreadsheet 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 $3,400,000 Ched: My Work Previous > Next Prepare the absorption conce Gallatin County Motors Inc. Absorption Costing Income Statement For the Month Ended July 31 Sales $3,400,000 Cost of goods sold Gross profit Selling and administrative expense Operating income 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 Variable cost of goods sold Manufacturing margin Variable selling and administrative expenses Contribution margin Fixed costs Eles factory overhead costs Fixed selling and administrative OS Total fixed costs 3,400,000 $ Check My Work Previous > Next $ Selling and administrative OSRE Operating income 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 3,400,000 Variable cost of goods sold Manufacturing margin Variable selling and administrative expenses Contribution margin Fixed costs: Fixed factory overhead costs Fixed selling and administratives Totalfixed costs: Operating Income c. What a the reason for the difference in the amount of Operating income reported in (a) and (b)? Under the method, the fed manufacturing cost included in the cost of goods sold is matched with the revenues. Under all of the fixed manufacturing costs deducted in the period in which incurred, regardless of the amount of inventory change. Thus, when inventory increases, the income statement will have a higher Operating income than will the variable costing income statement Check My Work Previous

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