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 (4,000 units)				$2,600,000
Production costs (4,350 units):
Direct materials		$1,218,000
Direct labor		522,000
Variable factory overhead		87,000
Fixed factory overhead		130,500		1,957,500
Selling and administrative expenses:
Variable selling and administrative expenses		$60,000
Fixed selling and administrative expenses		25,000		85,000

Question Content Area

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

Question Content Area

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