Income Statements under Absorption Costing and Variable Costing

Crazy Mountain Sports Inc. assembles and sells snowmobile engines. The company began operations on March 1 and operated at 100% of capacity during the first month. The following data summarize the results for March:

Line Item Description	Amount	Amount
Sales (3,000 units)		$1,650,000
Production costs (3,000 units):
Direct materials	$709,500
Direct labor	305,100
Variable factory overhead	49,800
Fixed factory overhead	78,000	1,142,400
Selling and administrative expenses:
Variable selling and administrative expenses	$35,400
Fixed selling and administrative expenses	14,900	50,300

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

This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.

a. Prepare an income statement according to the absorption costing concept. h Dronara an inenmo ctatomont arenrdinn to the variahla enctinn ronront c. vvnat is tne reason ror tne arrerence in tne amount or operacing income reportea in (a) ana (D)? Under the method, the fixed manufacturing cost included in the cost of goods sold is matched with the revenues. Under Thus, when inventory increases, the income statement will have a higher operating income. , all of the fixed manufacturing cost is deducted in the period in which it is incurred, regardless of the amount of inventory chan