Income Statements under Absorption Costing and Variable Costing

Crazy Mountain Sports Inc. assembles and sells snowmobile engines. The company began operations on March 1 and operated at 100% of capacity during the first month. The following data summarize the results for March:

Line Item Description	Amount	Amount
Sales (12,500 units)		$6,250,000
Production costs (15,000 units):
Direct materials	$1,800,000
Direct labor	1,275,000
Variable factory overhead	225,000
Fixed factory overhead	600,000	3,900,000
Selling and administrative expenses:
Variable selling and administrative expenses	$125,000
Fixed selling and administrative expenses	45,000	170,000

Question Content Area

a. Prepare an income statement according to the absorption costing concept.

Line Item Description	Amount
Cost of goods soldDirect laborDirect materialsFixed factory overhead costsSales	$- Select -
Cost of goods soldProduction costsSalesSelling and administrative expensesVariable factory overhead	- Select -
Cost of goods available for saleCost of goods soldGross profitProduction costsSales	$- Select -
Direct materialsFixed factory overhead costsProduction costsSelling and administrative expensesVariable factory overhead	- Select -
Operating incomeLoss from operations	$- Select -

Question Content Area

b. Prepare an income statement according to the variable costing concept.

Line Item Description	Amount	Amount
Fixed factory overhead costsFixed selling and administrative expensesManufacturing marginProduction costsSales		$- Select -
Direct materialsFixed factory overhead costsManufacturing marginProduction costsVariable cost of goods sold		- Select -
Fixed factory overhead costsFixed selling and administrative expensesManufacturing marginProduction costsSales		$- Select -
Manufacturing marginProduction costsSalesVariable cost of goods soldVariable selling and administrative expenses		- Select -
Contribution marginLoss from operationsManufacturing marginOperating incomeSales		$- Select -
Fixed costs:
Direct laborDirect materialsFixed factory overhead costsProduction costsSales	$- Select -
Direct laborFixed selling and administrative expensesManufacturing marginProduction costsVariable selling and administrative expenses	- Select -	blank
Contribution marginManufacturing marginOperating incomeSalesTotal fixed costs		- Select -
Operating incomeLoss from operations		$- Select -