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 (10,000 units)$1,500,000Production costs (13,000 units):Direct materials$721,500Direct labor345,800Variable factory overhead172,900Fixed factory overhead115,7001,355,900Selling and administrative expenses:Variable selling and administrative expenses$210,200Fixed selling and administrative expenses81,400291,600

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 StatementFor the Month Ended August 31Sales

$

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Cost of goods sold

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Gross profit

$

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Selling and administrative expenses

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Income from operations

$

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

Shawnee Motors Inc.Variable Costing Income StatementFor the Month Ended August 31Sales

$

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Variable cost of goods sold

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Manufacturing margin

$

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Variable selling and administrative expenses

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Contribution margin

$

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Fixed costs:Fixed factory overhead

$

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Fixed selling and administrative expenses

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Total fixed costs

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Income from operations

$

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