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 (14,000 units)		$2,240,000
Production costs (18,000 units):
Direct materials	$1,065,600
Direct labor	511,200
Variable factory overhead	255,600
Fixed factory overhead	171,000		2,003,400
Selling and administrative expenses:
Variable selling and administrative expenses	$310,500
Fixed selling and administrative expenses	120,200		430,700

If required, round interim per-unit calculations to the nearest cent.

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

Gallatin County Motors Inc. Absorption Costing Income Statement For the Month Ended July 31

Sales	$_______
Cost of goods sold	__________
Gross profit	$________
Selling and administrative expenses	__________
Operating income	$________

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

Sales		$_________
Variable cost of goods sold		____________
Manufacturing margin		$__________
Variable selling and administrative expenses		___________
Contribution margin		$__________
Fixed costs:
Fixed factory overhead costs	$__________
Fixed selling and administrative expenses	___________
Total fixed costs		____________
Operating income		$__________