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 (16,000 units)		$1,600,000
Production costs (21,000 units):
Direct materials	$777,000
Direct labor	373,800
Variable factory overhead	186,900
Fixed factory overhead	123,900		1,461,600
Selling and administrative expenses:
Variable selling and administrative expenses	$226,500
Fixed selling and administrative expenses	87,700		314,200

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

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a. An income statement according to the absorption costing concept.

Cost of goods sold Direct labor Direct materials Fixed factory overhead costs Sales	$______
Cost of goods sold Gross profit Sales Selling and administrative expenses Variable factory overhead Cost of goods sold	$_______
Direct labor Direct materials Gross Profit Fixed factory overhead costs Sales Gross profit	$_______
Cost of goods sold Fixed factory overhead costs Sales Selling and administrative expenses Variable factory overhead Selling and administrative expenses	$_________
Operating income Loss from operations Operating income	$__________

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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.

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b An income statement according to the variable costing concept.

Contribution margin Fixed selling and administrative expenses Manufacturing margin Sales Variable selling and administrative expenses Sales		$_______
Fixed factory overhead costs Fixed selling and administrative expenses Manufacturing margin Variable cost of goods sold Variable selling and administrative expenses Variable cost of goods sold		_________Variable cost of goods sold
Contribution margin Sales Variable cost of goods sold Variable selling and administrative expenses Manufacturing margin		$_______
Fixed factory overhead costs Fixed selling and administrative expenses Manufacturing margin Variable cost of goods sold Variable selling and administrative expenses Variable selling and administrative expenses		Variable selling and administrative expenses$_______
Contribution margin Fixed selling and administrative expenses Manufacturing margin Sales Variable selling and administrative expenses Contribution margin		$______Contribution margin
Fixed costs:
Contribution margin Fixed factory overhead costs Manufacturing margin Sales Variable cost of goods sold Fixed factory overhead costs	$_______Fixed factory overhead costs
Fixed selling and administrative expenses Manufacturing margin Sales Variable cost of goods sold Variable selling and administrative expenses Fixed selling and administrative expenses	Fixed selling and administrative expenses_________
Contribution margin Operating income Manufacturing margin Sales Total fixed costs Total fixed costs		Total fixed costs $_______
Operating income Loss from operations Operating income		$___________Operating income