ncome 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 (19,500 units)$2,340,000Production costs (25,000 units):Direct materials$1,110,000Direct labor532,500Variable factory overhead267,500Fixed factory overhead177,5002,087,500Selling and administrative expenses:Variable selling and administrative expenses$323,600Fixed selling and administrative expenses125,300448,900

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

a. 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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Feedback

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. 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

Income from operations

$