Income Statements under Absorption Costing and Variable Costing 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 July: Sales (18,500 units) $2,960,000 Production costs (24,000 units): Direct materials $1,420,800 Direct labor 681,600 Variable factory overhead 340,800 Fixed factory overhead 228,000 2,671,200 Selling and administrative expenses: Variable selling and administrative expenses $414,000 Fixed selling and administrative expenses 160,300 574,300 If required, round interim per-unit calculations to the nearest cent. Question Content Area

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

Cost of goods soldDirect laborDirect materialsFixed factory overhead costsSalesSales$SalesCost of goods soldGross profitSalesSelling and administrative expensesVariable factory overheadCost of goods soldCost of goods soldDirect laborDirect materialsGross profitFixed factory overhead costsSales$Cost of goods soldFixed factory overhead costsSalesSelling and administrative expensesVariable factory overhead Operating incomeLoss from operations$

Feedback Area

Feedback

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.

Question Content Area

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

Contribution marginFixed selling and administrative expensesManufacturing marginSalesVariable selling and administrative expenses $- Select -Fixed factory overhead costsFixed selling and administrative expensesManufacturing marginVariable cost of goods soldVariable selling and administrative expenses - Select -Contribution marginManufacturing marginSalesVariable cost of goods soldVariable selling and administrative expenses $- Select -Fixed factory overhead costsFixed selling and administrative expensesManufacturing marginVariable cost of goods soldVariable selling and administrative expenses - Select -Contribution marginFixed selling and administrative expensesManufacturing marginSalesVariable selling and administrative expenses $- Select -Fixed costs: Contribution marginFixed factory overhead costsManufacturing marginSalesVariable cost of goods sold$- Select - Fixed selling and administrative expensesManufacturing marginSalesVariable cost of goods soldVariable selling and administrative expenses- Select - Contribution marginOperating incomeManufacturing marginSalesTotal fixed costs - Select -Operating incomeLoss from operations $- Select