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 (11,500 units)		$1,150,000
Production costs (15,000 units):
Direct materials	$555,000
Direct labor	267,000
Variable factory overhead	133,500
Fixed factory overhead	88,500		1,044,000
Selling and administrative expenses:
Variable selling and administrative expenses	$161,800
Fixed selling and administrative expenses	62,600		224,400

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 v J 1.- 1.150.ooo 4 Cost of goods sold 7 J Gross profit V J Selling and administrative expenses v J SUSHI Operating income V J b. Prepare an income statement according to the variable costing concept. Gallatin County Motors Inc. Variable Costing Income Statement For the Month Ended July 31 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