income Statements under Absorption Costing and Variable Costing

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:

Sales (13,500 units)		$2,160,000
Production costs (17,000 units):
Direct materials	$1,006,400
Direct labor	482,800
Variable factory overhead	241,400
Fixed factory overhead	161,500		1,892,100
Selling and administrative expenses:
Variable selling and administrative expenses	$293,300
Fixed selling and administrative expenses	113,500		406,800

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

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a. what would the income statement according to the absorption costing concept be.

	$Sales
	Cost of goods sold
	$Gross profit
	Selling and administrative expenses
	$Operating income

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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.

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b. what would the income statement according to the variable costing concept be

		$Sales
		Variable cost of goods sold
		$Manufacturing margin
		Variable selling and administrative expenses
		$Contribution margin
	$Fixed factory overhead costs
	Fixed selling and administrative expenses
		Total fixed costs