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Sales (8,500 units) $850,000 Production costs (11,000 units): Direct materials $407,000 Direct labor 195,800 Variable factory overhead 97,900 Fixed factory overhead 64,900 765,600 Selling and

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Sales (8,500 units) $850,000 Production costs (11,000 units): Direct materials $407,000 Direct labor 195,800 Variable factory overhead 97,900 Fixed factory overhead 64,900 765,600 Selling and administrative expenses: Variable selling and administrative expenses $118,700 Fixed selling and administrative expenses 45,900 164,600 If required, round interim per-unit calculations to the nearest cent. a. Prepare an income statement according to the absorption costing concept. Gallatin County Motors Inc. Absorption Costing Income Statement For the Month Ended July 31 Sales 850,000 Cost of goods sold v X Gross profit Selling and administrative expenses 164,600 Operating income y Feedback Check My Work eBook Show Me How of factory overhead. b. Prepare an income statement according to the variable costing concept. Gallatin County Motors Inc. Variable Costing Income Statement For the Month Ended July 31 Sales y 850,000 Variable cost of goods sold Manufacturing margin Variable selling and administrative expenses 118,700 Contribution margin Fixed costs: Fixed factory overhead costs 64.900 Fixed selling and administrative expenses 45,900 Total fixed costs Operating income v S Feedback c. What is the reason for the difference in the amount of operating income reported in (a) and (b)? Under the absorption costing method, the fixed manufacturing cost included in the cost of go manufacturina cost is deducted in the period in which it is ncurred regardless of the amount of inve! Check My Work

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