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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 (8,500 units) $1,275,000 Production costs (11,000 units): Direct materials $610,500 Direct labor 292,600 Variable factory overhead 146,300 Fixed factory overhead 97,900 1,147,300 Selling and administrative expenses: Variable selling and administrative expenses $177,800 Fixed selling and administrative expenses 68,800 246,600 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 v Cost of goods sold v Gross profit v Selling and administrative expenses v Income from operations v Feedback Check My Work 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
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