Income Statements underAbsorptionandVariable Costing

Shawnee Motors Inc. assembles and sells MP3 players. The company began operations on August 1 and operated at 100% of capacity during the first month. The following data summarize the results for August:

Sales (16,500 units)$1,650,000Production costs (21,000 units):Direct materials$777,000Direct labor373,800Variable factory overhead186,900Fixed factory overhead123,9001,461,600Selling and administrative expenses:Variable selling and administrative expenses$226,500Fixed selling and administrative expenses87,700314,200

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

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

Shawnee Motors Inc.Absorption

Costing Income Statement

For the Month Ended August 31Sales

Cost of goods sold$

Gross profit$

Selling and administrative expenses $

Income from operations $

Learning Objective 1.

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

Shawnee Motors Inc.Variable

Costing Income Statement

For the Month Ended August 31Sales

Variable cost of goods sold$

Manufacturing margin$

Variable selling and administrative expenses$

Contribution margin$

Fixed costs

:Fixed factory overhead$

Fixed selling and administrative expenses$

Total fixed costs$

Income from operations$