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 (3,500 units) | $2,590,000 | ||||
Production costs (4,000 units): | |||||
Direct materials | $1,272,800 | ||||
Direct labor | 547,200 | ||||
Variable factory overhead | 89,200 | ||||
Fixed factory overhead | 140,000 | 2,049,200 | |||
Selling and administrative expenses: | |||||
Variable selling and administrative expenses | $63,500 | ||||
Fixed selling and administrative expenses | 26,600 | 90,100 |
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 (3,500 units) | $2,590,000 | ||||
Production costs (4,000 units): | |||||
Direct materials | $1,272,800 | ||||
Direct labor | 547,200 | ||||
Variable factory overhead | 89,200 | ||||
Fixed factory overhead | 140,000 | 2,049,200 | |||
Selling and administrative expenses: | |||||
Variable selling and administrative expenses | $63,500 | ||||
Fixed selling and administrative expenses | 26,600 | 90,100 |
a. Prepare an income statement according to the absorption costing concept.
Gallatin County Motors Inc. | ||
Absorption Costing Income Statement | ||
For the Month Ended July 31 | ||
$ | ||
$ | ||
$ |
b. Prepare an income statement according to the variable costing concept.
Gallatin County Motors Inc. | |||||
Variable Costing Income Statement | |||||
For the Month Ended July 31 | |||||
$ | |||||
$ | |||||
$ | |||||
Fixed costs: | |||||
$ | |||||
$ |
c. What is the reason for the difference in the amount of Operating income reported in (a) and (b)?
Under the method, the fixed manufacturing cost included in the cost of goods sold is matched with the revenues. Under , all of the fixed manufacturing cost is deducted in the period in which it is incurred, regardless of the amount of inventory change. Thus, when inventory increases, the income statement will have a higher Operating income than will the variable costing income statement.
a. Prepare an income statement according to the absorption costing concept.
Gallatin County Motors Inc. | ||
Absorption Costing Income Statement | ||
For the Month Ended July 31 | ||
$ | ||
$ | ||
$ |
b. Prepare an income statement according to the variable costing concept.
Gallatin County Motors Inc. | |||||
Variable Costing Income Statement | |||||
For the Month Ended July 31 | |||||
$ | |||||
$ | |||||
$ | |||||
Fixed costs: | |||||
$ | |||||
$ |
c. What is the reason for the difference in the amount of Operating income reported in (a) and (b)?
Under the method, the fixed manufacturing cost included in the cost of goods sold is matched with the revenues. Under , all of the fixed manufacturing cost is deducted in the period in which it is incurred, regardless of the amount of inventory change. Thus, when inventory increases, the income statement will have a higher Operating income than will the variable costing income statement.
Income statements under absorption costing and variable costing Gallatin County Motors Inc. assembles and sells snowmobile...
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 (4,000 units) $2,600,000 Production costs (4,350 units): Direct materials $1,218,000 Direct labor 522,000 Variable factory overhead 87,000 Fixed factory overhead 130,500 1,957,500 Selling and administrative expenses: Variable selling and administrative expenses $60,000 Fixed selling and administrative expenses...
Income statements under absorption 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 (3,500 units) $2,450,000 Production costs (4,000 units): Direct materials $1,204,000 Direct labor 517,600 Variable factory overhead 84,400 Fixed factory overhead 132,400 1,938,400 Selling and administrative expenses: Variable selling and administrative expenses $60,100 Fixed selling and administrative expenses 25,200...
Income Statements under Absorption and Variable Costing Shawnee Motors Inc, assembles and sells snowmobile engines. 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: $600,000 Sales (2,000 units) Production costs (2,400 units): Direct materials Direct labor $300,000 115,200 43,200 21,600 Variable factory overhead Fixed factory overhead 480,000 Selling and administrative expenses: Variable selling and administrative expenses $50,000 22,000 Fixed selling and administrative expenses 72,000...
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 (4,000 units) $2,600,000 Production costs (4,350 units): Direct materials $1,218,000 Direct labor 522,000 Variable factory overhead 87,000 Fixed factory overhead 130,500 1,957,500 Selling and administrative expenses: Variable selling and administrative expenses $60,000 Fixed selling and administrative expenses 25,000 85,000a....
i se the results for Income Statements under Absorption Conting and Variable Casting in County Motors Inc. assemblies and snowmobile engines. The company began operations on July 1 and operated at 100% of capacity during the first month. The following data w Sales (4.000 units) $2.600,000 Productions (4.350 units) Direct $1.218.000 Direct labor 522.000 Variable factory overhead Food factory overhead 130,500 1,957,500 ding and administrative expenses Variable selling and administrative expenses Fored selling and administrative expenses 25.000 3.000 ) .....
1. Inventory Valuation under Absorption Costing and Variable Costing At the end of the first year of operations, 6,700 units remained in the finished goods inventory. The unit manufacturing costs during the year were as follows: Direct materials $38.30 Direct labor 13.80 Fixed factory overhead 5.30 Variable factory overhead 4.70 Determine the cost of the finished goods inventory reported on the balance sheet under (a) the absorption costing concept and (b) the variable costing concept. Absorption costing $ 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: 1 Sales (31,000 units) $7,750,000.00 2 Production costs (38,000 units): 3 Direct materials $3,040,000.00 4 Direct labor 1,710,000.00 5 Variable factory overhead 950,000.00 6 Fixed factory overhead 570,000.00 6,270,000.00 7 Selling and administrative expenses: 8 Variable selling and administrative expenses $1,120,000.00 9 Fixed selling and administrative...
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: $1,280,000 Sales (8,000 units) Production costs (10,000 units): Direct materials $592,000 Direct labor 284,000 142,000 Variable factory overhead Fixed factory overhead 95,000 1,113,000 Selling and administrative expenses: Variable selling and administrative expenses Fixed selling and administrative expenses $172,500 66,800 239,300...
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 (16,500 units) $1,485,000 Production costs (21,000 units): Direct materials $699,300 Direct labor 336,000 Variable factory overhead 168,000 Fixed factory overhead 111,300 1,314,600 Selling and administrative expenses: Variable selling and administrative expenses $203,800 Fixed selling and administrative expenses 78,900 282,700...
help solving this 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...