Module 6 Assignment

1. TMM.6-1
2. EX.06-02.ALGO
3. EX.06-12.BLANKSHEET.ALGO

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   Income Statements under Absorption and Variable 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 (14,000 units)				$1,400,000
   Production costs (18,000 units):
   Direct materials		$666,000
   Direct labor		320,400
   Variable factory overhead		160,200
   Fixed factory overhead		106,200		1,252,800
   Selling and administrative expenses:
   Variable selling and administrative expenses		$194,200
   Fixed selling and administrative expenses		75,200		269,400

   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 31
   Sales	$
   Cost of goods sold
   Gross profit	$
   Selling and administrative expenses
   Income from operations	$

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   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.

   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 31
   Sales		$
   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		$