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:

1	Sales (33,000 units)		$8,250,000.00
2	Production costs (40,500 units):
3	Direct materials	$3,240,000.00
4	Direct labor	1,822,500.00
5	Variable factory overhead	1,012,500.00
6	Fixed factory overhead	607,500.00	6,682,500.00
7	Selling and administrative expenses:
8	Variable selling and administrative expenses	$1,160,000.00
9	Fixed selling and administrative expenses	230,000.00	1,390,000.00

	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 Operating income reported in (a) and (b)?

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

Crazy Mountain Sports Inc.

Absorption Costing Income Statement

Label:

1	Sales	$8250000
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5	Operating income

b. Prepare an income statement according to the variable costing concept.

Crazy Mountain Sports Inc.

Variable Costing Income Statement

Label:

1			$8250000
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