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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 (17,000 units) | $1,530,000 | ||||
Production costs (22,000 units): | |||||
Direct materials | $732,600 | ||||
Direct labor | 352,000 | ||||
Variable factory overhead | 176,000 | ||||
Fixed factory overhead | 116,600 | 1,377,200 | |||
Selling and administrative expenses: | |||||
Variable selling and administrative expenses | $213,500 | ||||
Fixed selling and administrative expenses | 82,600 | 296,100 |
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 |
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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 |
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