Income Statements under Absorption Costing and Variable Costing b$.$ Prepare an income statement according to the variable costing concept.

Gallatin County Motors Inc.

Variable Costing Income Statement

For the Month Ended July $31$

Feedback

Check My Work

b$.$ Under variable costing, the cost of goods manufactured includes only variable manufacturing costs.

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 $(4,000$ units$)$

Production costs units$)$:

$$2,600,000$

Direct materials

Direct labor

$$1,218,000$

Variable factory overhead

$522,000$

Fixed factory overhead

$87,000$

$130,500,1,957,500$

Selling and administrative expenses:

Variable selling and administrative expenses

$$60,000$

Fixed selling and administrative expenses

$25,000$

$85,000$

a$.$ Prepare an income statement according to the absorption costing concept.

Gallatin County Motors Inc.

Absorption Costing Income Statement

For the Month Ended July $31$

Cost of goods sold

Gross profit

Selling and administrative expenses