Gallatin County Motors Inc.Variable Costing Income StatementFor the Month Ended July 31Fixed costs:c. What is the reason for the difference in the amount of operating income reported in (a) and (b)?Under themethod, the fixed manufacturing cost included in the cost of goods sold is matched with the revenues. Underall of the fixedmanufacturing cost is deducted in the period in which it is incurred, regardless of the amount of inventory change. Thus, when inventory increases, theincomestatement will have a higher operating income. Income Statements under Absorption Costing and Variable CostingGallatin 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 followingdata summarize the results for July:Sales (15,000 units)$1,800,000Production costs (19,000 units):Direct materials$843,600Direct labor404,700Variable factory overhead203,300Fixed factory overhead134,9001,586,500Selling and administrative expenses:Variable selling and administrative expenses$245,900Fixed selling and administrative expenses95,200341,100If required, round interim per-unit calculations to the nearest cent.a. Prepare an income statement according to the absorption costing concept.Gallatin County Motors Inc.Absorption Costing IncomeStatementFor the Month Ended July 31

Name: Gallatin County Motors Inc.Variable Costing Income StatementFor the M
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Description: Gallatin County Motors Inc.Variable Costing Income StatementFor the Month Ended July 31Fixed costs:c. What is the reason for the difference in the amount of operating income reported in (a) and (b)?Under themethod, the fixed manufacturing cost inclu

Variable costing treats all fixed costs as period coats, so it only uses the variable manufacturing…

Answered: a. Prepare an income statement…

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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

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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 (19,500 units) $2,925,000 Production costs (25,000 units): Direct materials $1,387,500 Direct labor 665,000 Variable factory overhead 332,500 Fixed factory overhead 222,500 2,607,500 Selling and administrative expenses: Variable selling and administrative expenses $404,200 Fixed selling and administrative expenses 156,500 560,700 If required, round interim per-unit calculations to the nearest cent. a. Prepare an income statement according to the absorption costing concept.
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