Labels and Amount Descriptions Instructions 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 $7.750,000.00 1 Sales (31.000 units) 1 Production costs (38,000 units): 3 Direct materials $3,040,000.00 4 1.710,000.00 5 950,000.00 6 570,000.00 6.270,000.00 Direct labor Variable factory overhead Fixed factory overhead Selling and administrative expenses: $ Variable selling and administrative expenses Fixed selling and administrative expenses $1.120,000.00 200.000.00 1,320,000.00 Required: a. Prepare an income statement according to the absorption costing concept b. Prepare an income statement according to the variable costing concept c. What is the reason for the difference in the amount of Operating income reported in (a) and (b)? Be sure to complete the statement heading Refer to the Nist of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon () will automatically appear in it is required. Enter amounts as positive numbers unless the amount is a calculation that results in a negative amount. For example: Netloss should be negative. Expenses should be positive Absorption Costing Income Statement a. Prepare an income statement according to the absorption costing concept. Be sure to complete the statement heading. Refer to the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon () will automatically appear if it is required. Enter amounts as positive numbers unless the amount is a calculation that results in a negative amount. For example: Net loss should be negative. Expenses should be positive. Gallatin County Motors Inc., Absorption Costing Income Statement 2 (Label) 1 2 3 4 5 Variable Costing Income Statement Gallatin County Motors Inc. Variable Costing Income Statement (Label) 1 2 3 4 5 6 (Label) 7 3 10 Instructions Labels and Amount Descriptions Absorption Costing Income Statement Variable Costing Income Statement Final Question c. What is the reason for the difference in the amount of Operating income reported in (a) and (b)? Check all that apply Under absorption costing, when inventory increases, the income statement will have a higher Operating income than will the variable costing income statement Under absorption costing, when inventory increases, the income statement will have a lower Operating income than will the variable costing income statement Under variable costing, the units that were produced but unsold include fixed factory overhead cost, which is not included in cost of goods sold. There is no difference, the Operating income reported in (a) and (b) is the same Under variable costing, all of the fixed factory overhead cost is deducted in the period in which it is incurred, regardless of the amount of inventory change Instructions Labels and Amount Descriptions Ga began firs Labels Fixed costs For the Month Ended July 31 July 31 Amount Descriptions Contribution margin 10.00 Contribution margin ratio 10.00 Cost of goods sold 10.00 Fixed factory overhead costs Fixed selling and administrative expenses 0.00 Gross profit Instructions Labels and Amount Descriptions Ga Gross profit firs Operating income Loss from operations Manufacturing margin Planned contribution margin Sales Sales mix Selling and administrative expenses Total fixed costs Variable cost of goods sold Variable selling and administrative expenses
