Question
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
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 (19,500 units) | $2,730,000 | ||||
Production costs (25,000 units): | |||||
Direct materials | $1,295,000 | ||||
Direct labor | 622,500 | ||||
Variable factory overhead | 310,000 | ||||
Fixed factory overhead | 207,500 | 2,435,000 | |||
Selling and administrative expenses: | |||||
Variable selling and administrative expenses | $377,400 | ||||
Fixed selling and administrative expenses | 146,100 | 523,500 |
If required, round interim per-unit calculations to the nearest cent.
a. Prepare an income statement according to the absorption costing concept.
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 | $ |
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