Do not give answer in image b. Prepare an income statement according to the variable costing concept.Gallatin County Motors Inc.Variable Costing Income StatementFor the Month Ended July 31Sales✓Variable cost of goods soldManufacturing marginVariable selling and administrative expensesContribution margin ✓Fixed costs:Fixed factory overhead costsFixed selling and administrative expensesTotal fixed costsOperating incomeFeedbackCheck My Work✓✓✓✓8b. Under variable costing, the cost of goods manufactured includes only variable manufacturing costs.c. What is the reason for the difference in the amount of operating income reported in (a) and (b)?Under the absorption costing ✔method, the fixed manufacturing cost included in the cost of goods sold is matched with the revenues. Under variable costingmanufacturing cost is deducted in the period in which it is incurred, regardless of the amount of inventory change. Thus, when inventory increases, the absorption costinghave a higher operating income.✓, all of the fixed✔ income statement will 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 following data summarize theresults for July:Sales (19,000 units)Production costs (25,000 units):Direct materialsDirect laborVariable factory overheadFixed factory overheadSelling and administrative expenses:Variable selling and administrative expensesFixed selling and administrative expenses$1,202,500577,500287,500192,500$350,300135,600If required, round interim per-unit calculations to the nearest cent.SalesCost of goods soldGross profitSelling and administrative expensesOperating income$2,470,000000002,260,000a. Prepare an income statement according to the absorption costing concept.Gallatin County Motors Inc.Absorption Costing Income StatementFor the Month Ended July 31485,900

Lets understand the basics.There are two methods for calculating operating income which are,(1)…

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 Sales Variable cost of goods sold Manufacturing margin Variable selling and administrative expenses Contribution margin Fixed costs: Fixed factory overhead costs Fixed selling and administrative expenses Total fixed costs ✔ 8

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 Sales Variable cost of goods sold Manufacturing margin Variable selling and administrative expenses Contribution margin Fixed costs: Fixed factory overhead costs Fixed selling and administrative expenses Total fixed costs ✔ 8

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter7: Variable Costing For Management analysis

Section: Chapter Questions

Problem 2E: Gallatin County Motors Inc. assembles and sells snowmobile engines. The company began operations on...

See similar textbooks

Similar questions

Kokomo Kayak Inc. uses the process cost system. The following data, taken from the organizations books, reflect the results of manufacturing operations during the month of March: Production Costs Work in process, beginning of period: Costs incurred during month: Production Data: 18,000 units finished and transferred to stockroom. Work in process, end of period, 3,000 units, two-thirds completed. Required: Prepare a cost of production summary for March.
Absorption and variable costing income statements for two months and analysis During the first month of operations ended July 31, Head Gear Inc. manufactured 6,400 hats, of which 5,200 were sold. Operating data for the month are summarized as follows: During August, Head Gear Inc. manufactured 4,000 hats and sold 5,200 hats. Operating data for August are summarized as follows: Instructions 1. Using the absorption costing concept, prepare income statements for (a) July and (b) August. 2. Using the variable costing concept, prepare income statements for (a) July and (b) August. 3. A. Explain the reason for the differences in the amount of operating income in (1) and (2) for July. B. Explain the reason for the differences in the amount of operating income in (1) and (2) for August. 4. Based on your answers to (1) and (2), did Head Gear Inc. operate more profitably in July or in August? Explain.
Absorption and variable costing income statements During the first month of operations ended July 31, YoSan Inc. manufactured 2,400 flat panel televisions, of which 2,000 were sold. Operating data for the month are summarized as follows: Instructions 1. Prepare an income statement based on the absorption costing concept. 2. Prepare an income statement based on the variable costing concept. 3. Explain the reason for the difference in the amount of operating income reported in (1) and (2).
Dublin Brewing Co. uses the process cost system. The following data, taken from the organizations books, reflect the results of manufacturing operations during October: Production Costs Work in process, beginning of period: Costs incurred during month: Production Data: 13,000 units finished and transferred to stockroom Work in process, end of period, 2,000 units one-half completed Required: Prepare a cost of production summary for October.
Total and Unit Product Cost Martinez Manufacturing Inc. showed the following costs for last month: Last month, 4,000 units were produced and sold. Required: 1. Classify each of the costs as product cost or period cost. 2. What is the total product cost for last month? 3. What is the unit product cost for last month?
The following product costs are available for Kellee Company on the production of eyeglass frames: direct materials, $32,125; direct labor, $23.50; manufacturing overhead, applied at 225% of direct labor cost; selling expenses, $22,225; and administrative expenses, $31,125. The direct labor hours worked for the month are 3,200 hours. A. What are the prime costs? B. What are the conversion costs? C. What is the total product cost? D. What is the total period cost? E. If 6.425 equivalent units are produced, what is the equivalent material cost per unit? F. What is the equivalent conversion cost per unit?
Algers Company produces dry fertilizer. At the beginning of the year, Algers had the following standard cost sheet: Algers computes its overhead rates using practical volume, which is 54,000 units. The actual results for the year are as follows: a. Units produced: 53,000 b. Direct materials purchased: 274,000 pounds at 2.50 per pound c. Direct materials used: 270,300 pounds d. Direct labor: 40,100 hours at 17.95 per hour e. Fixed overhead: 161,700 f. Variable overhead: 122,000 Required: 1. Compute price and usage variances for direct materials. 2. Compute the direct labor rate and labor efficiency variances. 3. Compute the fixed overhead spending and volume variances. Interpret the volume variance. 4. Compute the variable overhead spending and efficiency variances. 5. Prepare journal entries for the following: a. The purchase of direct materials b. The issuance of direct materials to production (Work in Process) c. The addition of direct labor to Work in Process d. The addition of overhead to Work in Process e. The incurrence of actual overhead costs f. Closing out of variances to Cost of Goods Sold
Overhead application rate Roll Tide Manufacturing Inc. uses a job order cost system and standard costs. It manufactures one product, whose standard cost follows: The standards are based on normal capacity of 2,700 direct labor hours. Actual activity for March follows: Required: 1. Compute the variable and fixed factory overhead rates per unit. 2. Compute the variable and fixed overhead rates per direct labor hour. 3. Determine the total fixed factory overhead based on normal capacity.
Income Statements under Absorption and Variable Costing In the coming year, Kalling Company expects to sell 28,700 units at 32 each. Kallings controller provided the following information for the coming year: Required: 1. Calculate the cost of one unit of product under absorption costing. 2. Calculate the cost of one unit of product under variable costing. 3. Calculate operating income under absorption costing for next year. 4. Calculate operating income under variable costing for next year.
Business Specialty, Inc., manufactures two staplers: small and regular. The standard quantities of direct labor and direct materials per unit for the year are as follows: The standard price paid per pound of direct materials is 1.60. The standard rate for labor is 8.00. Overhead is applied on the basis of direct labor hours. A plantwide rate is used. Budgeted overhead for the year is as follows: The company expects to work 12,000 direct labor hours during the year; standard overhead rates are computed using this activity level. For every small stapler produced, the company produces two regular staplers. Actual operating data for the year are as follows: a. Units produced: small staplers, 35,000; regular staplers, 70,000. b. Direct materials purchased and used: 56,000 pounds at 1.5513,000 for the small stapler and 43,000 for the regular stapler. There were no beginning or ending direct materials inventories. c. Direct labor: 14,800 hours3,600 hours for the small stapler and 11,200 hours for the regular stapler. Total cost of direct labor: 114,700. d. Variable overhead: 607,500. e. Fixed overhead: 350,000. Required: 1. Prepare a standard cost sheet showing the unit cost for each product. 2. Compute the direct materials price and usage variances for each product. Prepare journal entries to record direct materials activity. 3. Compute the direct labor rate and efficiency variances for each product. Prepare journal entries to record direct labor activity. 4. Compute the variances for fixed and variable overhead. Prepare journal entries to record overhead activity. All variances are closed to Cost of Goods Sold. 5. Assume that you know only the total direct materials used for both products and the total direct labor hours used for both products. Can you compute the total direct materials and direct labor usage variances? Explain.
Cushing, Inc., costs products using a normal costing system. The following data are available for last year: Overhead is applied on the basis of direct labor hours. What was last years per unit product cost? a. 1.39 b. 4.40 c. 4.43 d. 3.01
On March 31, the end of the first month of operations, Barnard Inc. manufactured 15,000 units and sold 12,000 units. The following income statement was prepared, based on the variable costing concept: Determine the unit cost of goods manufactured, based on (a) the variable costing concept and (b) the absorption costing concept.