Question
Income Statements under Absorption and Variable Costing Shawnee Motors Inc. assembles and sells MP3 players. The company began operations on August 1 and operated at
Income Statements under Absorption and Variable Costing
Shawnee Motors Inc. assembles and sells MP3 players. The company began operations on August 1 and operated at 100% of capacity during the first month. The following data summarize the results for August:
Sales (20,000 units) | $2,600,000 | ||||
Production costs (26,000 units): | |||||
Direct materials | $1,250,600 | ||||
Direct labor | 600,600 | ||||
Variable factory overhead | 299,000 | ||||
Fixed factory overhead | 200,200 | 2,350,400 | |||
Selling and administrative expenses: | |||||
Variable selling and administrative expenses | $364,300 | ||||
Fixed selling and administrative expenses | 141,000 | 505,300 |
If required, round interim per-unit calculations to the nearest cent.
a. Prepare an income statement according to the absorption costing concept.
Shawnee Motors Inc. | |
Absorption Costing Income Statement | |
For the Month Ended August 31 | |
Sales | $ |
Cost of goods sold | |
Gross profit | $ |
Selling and administrative expenses | |
Income from operations | $ |
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.
Learning Objective 1.
b. Prepare an income statement according to the variable costing concept.
Shawnee Motors Inc. | ||
Variable Costing Income Statement | ||
For the Month Ended August 31 | ||
Sales | $ | |
Variable cost of goods sold | ||
Manufacturing margin | $ | |
Variable selling and administrative expenses | ||
Contribution margin | $ | |
Fixed costs: | ||
Fixed factory overhead | $ | |
Fixed selling and administrative expenses | ||
Total fixed costs | ||
Income from operations | $ |
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