Question

Instructions Shawn Motors Inc. assembles and sells snowmobile engines. The company began operations on August 1 and operated of 100% of capacity during the first month. The following data summarize the results for August: $750.00000 1 Sales (31,000 units) Production costs (38,000 units Direct materials $3,040,000.00 Direct labor 1.710,000.00 950000.00 570,000.00 6,270,000.00 Variable factory overhead Fixed factory overhead Selling and administrative expenses: Variable selling and administrative expenses Faxed selling and administrative expenses $1,120,000.00 20000000 132000000 Required: 6. Prepare an income statement according to the absorption costing concept." b. Prepare an income statement according to the variable costing concept What is the reason for the difference in the amount of income from operations reported in (a) and *Refer to the list of Labels and Amount Descriptions for the exact wording of the answer choices for rent entries. Be sure to complete the element heading Acolon) will automatically appear it is required Enteral amounts as positive numbers Check My Work All work saved. Assignment Score: 86.16%

Answer 1

a) Income statement cender absorption costing & Sales (31,000 units) 7,750,000 5,115,000 2,635,000 Less: Direct material. 2,480,000 (3,040,000 * 31000 Direct labour. 1,395,000 (1,710,000x31000) 38000 variable factory O.H. 775,000 (950,000 x 31000 38000 Variable manufacturing cost. 4,650,000 Fixed factory oth (570,000 x 31000 465,000 38000) Gross profit Less: Selling and admin expenses. Variable. 1,120,000 Flued. 209000 Net operating income 6) Income Statement ander Variable costing Sales (3100 units) Less: variable manufacturing cost 4,650,000 variable Selling capenses 1,120,000 contribution margin. Less. Fined period capenses. Factory overhead. 570000 Fined selling and admin 200,000 expents. Net operating income 1,320,000 $ 1,315,000 ($) 7,750,000 5,770,000 1,980,000 770,000 $ 1,210,000

c) The net operating income under absorption costing is & 105ooo more than the net operating income endor variable costing when production is more than sales, fixed manufacturing overhead is deferred that causes higher net operating income (inder absorption costing than variable costing.