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 (17,500 units)		$1,925,000
Production costs (23,000 units):
Direct materials	$936,100
Direct labor	448,500
Variable factory overhead	225,400
Fixed factory overhead	149,500		1,759,500
Selling and administrative expenses:
Variable selling and administrative expenses	$272,700
Fixed selling and administrative expenses	105,600		378,300

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

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

Cost of goods soldDirect laborDirect materialsFixed factory overhead costsSalesSales	?
Cost of goods soldGross profitSalesSelling and administrative expensesVariable factory overheadCost of goods sold	?
Direct laborDirect materialsGross profitFixed factory overhead costsSalesGross profit	?
Cost of goods soldFixed factory overhead costsSalesSelling and administrative expensesVariable factory overheadSelling and administrative expenses	?
Operating incomeLoss from operationsOperating income	?

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

Contribution marginFixed selling and administrative expensesManufacturing marginSalesVariable selling and administrative expensesSales		?
Fixed factory overhead costsFixed selling and administrative expensesManufacturing marginVariable cost of goods soldVariable selling and administrative expensesVariable cost of goods sold		?
Contribution marginManufacturing marginSalesVariable cost of goods soldVariable selling and administrative expensesManufacturing margin		?
Fixed factory overhead costsFixed selling and administrative expensesManufacturing marginVariable cost of goods soldVariable selling and administrative expensesVariable selling and administrative expenses		?
Contribution marginFixed selling and administrative expensesManufacturing marginSalesVariable selling and administrative expensesContribution margin		?
Fixed costs:
Contribution marginFixed factory overhead costsManufacturing marginSalesVariable cost of goods soldFixed factory overhead costs	$Fixed factory overhead costs
Fixed selling and administrative expensesManufacturing marginSalesVariable cost of goods soldVariable selling and administrative expensesFixed selling and administrative expenses	Fixed selling and administrative expenses
Contribution marginOperating incomeManufacturing marginSalesTotal fixed costsTotal fixed costs		Total fixed costs
Operating incomeLoss from operationsOperating income		$Operating income