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Income Statements under Absorption and Variable Costing Shawnee Motors Inc. assembles and sells MP3 players. The company began operations on August 1 and operated at 100% of capacity during the first month. The following data summarize the results for August: Sales (10,000 units) $1,200,000 Production costs (13,000 units): Direct materials $577,200 Direct labor 276,900 Variable factory overhead 139,100 Fixed factory overhead 92.300 1,085,500 Selling and administrative expenses: Variable selling and administrative expenses $168,300 Fixed selling and administrative expenses 65,100 233,400 If required, round interim per-unit calculations to the nearest cent. a. Prepare an income statement according to the absorption costing concept. Shawnee Motors Inc. Absorption Costing Income Statement For the Month Ended August 31 Sales $ 1,200,000 Cost of goods sold Gross profit Selling and administrative expenses Income from operations Feedback Check My Work 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. Learning Objective 1. b. Prepare an income statement according to the variable costing concept. Shawnee Motors Inc. Variable Costing Income Statement For the Month Ended August 31 Sales S 1 200.000 Variable cost of goods sold Manufacturing margin Variable selling and administrative expenses Contribution margin Fixed costs: Fixed factory overhead Fixed selling and administrative expenses Total fixed costs Income from operations

Answer 1

a hauone motoss. Inc Absorption Costing Inome statement for the Month Ended. August 3) sale $ 1,200,000 Cost of goods sold $ 835,000 ($ 1,085, soo, loooo) Less - 13,000 $365,000 o hess- Gross Proit Variable selly Exp. ($ 160, 300 x 10.000) 13,000 fixed selling Exp Income from operation $ 129,462 $ 65,100 $ 170,438 13.000 Variable costing income statement for the mouth Ended Augut 31 sale. $ IROD, 800 Less - variable. Cost A goods sold (8517,200+ $ 276,900 + $ 139, 100 10,000 & 764,000 Manufacting Margin $ 486,000 hess- variable selly Cost $ 129,462 Contribution Mangin $ 306,538 hess- fixed factory oueshead & 92,300 Less - fixed selly our head $ 65,100 Income from operation $ 149,138