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 (14,000 units)				$1,260,000
Production costs (18,000 units):
Direct materials		$599,400
Direct labor		288,000
Variable factory overhead		144,000
Fixed factory overhead		95,400		1,126,800
Selling and administrative expenses:
Variable selling and administrative expenses		$174,700
Fixed selling and administrative expenses		67,600		242,300

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