Income Statements under Absorption Costing and Variable Costing Gallatin County Motors Inc. assembles and sells snowmobile engines.
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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 (18,000 units) | $2,160,000 | |||
Production costs (23,000 units): | ||||
Direct materials | $1,021,200 | |||
Direct labor | 489,900 | |||
Variable factory overhead | 246,100 | |||
Fixed factory overhead | 163,300 | 1,920,500 | ||
Selling and administrative expenses: | ||||
Variable selling and administrative expenses | $297,700 | |||
Fixed selling and administrative expenses | 115,200 | 412,900 |
If required, round interim per-unit calculations to the nearest cent.
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a. Prepare an income statement according to the absorption costing concept.
Cost of goods soldDirect laborDirect materialsFixed factory overhead costsSalesSales | $Sales |
Cost of goods soldGross profitSalesSelling and administrative expensesVariable factory overheadCost of goods sold | Cost of goods sold |
Direct laborDirect materialsGross profitFixed factory overhead costsSalesGross profit | $Gross profit |
Cost of goods soldFixed factory overhead costsSalesSelling and administrative expensesVariable factory overheadSelling and administrative expenses | Selling and administrative expenses |
Operating incomeLoss from operationsOperating income | $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.
Question Content Area
b. Prepare an income statement according to the variable costing concept.
Contribution marginFixed selling and administrative expensesManufacturing marginSalesVariable selling and administrative expensesSales | $Sales | |
Fixed factory overhead costsFixed selling and administrative expensesManufacturing marginVariable cost of goods soldVariable selling and administrative expensesVariable cost of goods sold | Variable cost of goods sold | |
Contribution marginManufacturing marginSalesVariable cost of goods soldVariable selling and administrative expensesManufacturing margin | $Manufacturing margin | |
Fixed factory overhead costsFixed selling and administrative expensesManufacturing marginVariable cost of goods soldVariable selling and administrative expensesVariable selling and administrative expenses | Variable selling and administrative expenses | |
Contribution marginFixed selling and administrative expensesManufacturing marginSalesVariable selling and administrative expensesContribution margin | $Contribution margin | |
Fixed costs: | ||
Contribution marginFixed factory overhead costsManufacturing marginSalesVariable cost of goods soldFixed factory overhead costs | $Fixed factory overhead costs | |
Fixed selling and administrative expensesManufacturing marginSalesVariable cost of goods soldVariable selling and administrative expensesFixed selling and administrative expenses | Fixed selling and administrative expenses | |
Contribution marginOperating incomeManufacturing marginSalesTotal fixed costsTotal fixed costs | Total fixed costs | |
Operating incomeLoss from operationsOperating income | $Operating income |
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