Shawnee Motors Inc. assembles and sells snowmobile engines. 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:

1	Sales (38,000 units)		$9,500,000.00
2	Production costs (46,500 units):
3	Direct materials	$4,650,000.00
4	Direct labor	1,860,000.00
5	Variable factory overhead	1,162,500.00
6	Fixed factory overhead	697,500.00	8,370,000.00
7	Selling and administrative expenses:
8	Variable selling and administrative expenses	$1,250,000.00
9	Fixed selling and administrative expenses	235,000.00	1,485,000.00

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 income from operations reported in (a) and (b)?

* Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if it is required. Enter all amounts as positive numbers.

Absorption Costing Income Statement

a. Prepare an income statement according to the absorption costing concept. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if it is required. Enter all amounts as positive numbers.

Shawnee Motors Inc.

Absorption Costing Income Statement

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Variable Costing Income Statement

b. Prepare an income statement according to the variable costing concept. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if it is required. Enter all amounts as positive numbers.

Shawnee Motors Inc.

Variable Costing Income Statement

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