1. Income Statements underAbsorptionandVariable Costing
2. 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:
3. 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
4. If required, round interim per-unit calculations to the nearest cent.
5. a.Prepare an income statement according to the absorption costing concept.
6. Shawnee Motors Inc.Absorption Costing Income StatementFor the Month Ended August 31Sales
8. $
9. fill in the blank a81fbe04d05bf90_2
10. Cost of goods sold
12. fill in the blank a81fbe04d05bf90_4
13. Gross profit
15. $
16. fill in the blank a81fbe04d05bf90_6
17. Selling and administrative expenses
19. fill in the blank a81fbe04d05bf90_8
20. Income from operations
22. $
23. fill in the blank a81fbe04d05bf90_10
24. Feedback
26. a. Under absorption costing, the cost of goods manufactured includes direct materials, direct labor, and factory overhead costs. Both fixed and variable factory costs are included as part of factory overhead.
27. Learning Objective 1.
28. b.Prepare an income statement according to the variable costing concept.
29. Shawnee Motors Inc.Variable Costing Income StatementFor the Month Ended August 31Sales
31. $
32. fill in the blank 62aa12fbd077fe3_2
33. Variable cost of goods sold
35. fill in the blank 62aa12fbd077fe3_4
36. Manufacturing margin
38. $
39. fill in the blank 62aa12fbd077fe3_6
40. Variable selling and administrative expenses
42. fill in the blank 62aa12fbd077fe3_8
43. Contribution margin
45. $
46. fill in the blank 62aa12fbd077fe3_10
47. Fixed costs:Fixed factory overhead
49. $
50. fill in the blank 62aa12fbd077fe3_12
51. Fixed selling and administrative expenses
53. fill in the blank 62aa12fbd077fe3_14
54. Total fixed costs
56. fill in the blank 62aa12fbd077fe3_16
57. Income from operations
59. $
60. fill in the blank 62aa12fbd077fe3_18
61. Feedback
63. b. Under variable costing, the cost of goods manufactured includes only variable manufacturing costs.
64. Learning Objective 1.
65. c.What is the reason for the difference in the amount of income from operations reported in (a) and (b)?
66. Under theabsorption costing
68. method, the fixed manufacturing cost included in the cost of goods sold is matched with the revenues. Undervariable costing
70. , all of the fixed manufacturing cost is deducted in the period in which it is incurred, regardless of the amount of inventory change. Thus, when inventory increases, theabsorption costing
72. income statement will have a higher income from operations than will the variable costing income statement.
73. Feedback
75. Correct
76. Feedback
78. Partially correct