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Crazy Mountain Sports Inc. assembles and sells snowmobile engines. The company began operations on March 1 and operated at 100% of capacity during the first month. The following data summarize the results for March: Sales (32,000 units) 8,000,000.00 Production costs (41,000 units): Direct materials $3,280,000.00 Direct labor 2,255,000.00 Variable factory overhead 1,025,000.00 Fixed factory overhead 615,000.00 7,175,000.00 Selling and administrative expenses: Variable selling and administrative expenses $1,180,000.00 Fixed selling and administrative expenses 210,000.00 1,390,00.00 Required: • Prepare an income statement according to the absorption costing concept. • Prepare an income statement according to the variable costing concept. • What is the reason for the difference in the amount of Operating income reported in (a) and (b)?

Crazy Mountain Sports Inc. assembles and sells snowmobile engines. The company began operations on March 1 and operated at 100% of capacity during the first month. The following data summarize the results for March: Sales (32,000 units) 8,000,000.00 Production costs (41,000 units): Direct materials $3,280,000.00 Direct labor 2,255,000.00 Variable factory overhead 1,025,000.00 Fixed factory overhead 615,000.00 7,175,000.00 Selling and administrative expenses: Variable selling and administrative expenses $1,180,000.00 Fixed selling and administrative expenses 210,000.00 1,390,00.00 Required: • Prepare an income statement according to the absorption costing concept. • Prepare an income statement according to the variable costing concept. • What is the reason for the difference in the amount of Operating income reported in (a) and (b)?

FINANCIAL ACCOUNTING
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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Crazy Mountain Sports Inc. assembles and sells snowmobile engines. The company began operations on March 1 and operated at 100% of capacity during the first month. The following data summarize the results for March: Sales (32,000 units) 8,000,000.00 Production costs (41,000 units): Direct materials $3,280,000.00 Direct labor 2,255,000.00 Variable factory overhead 1,025,000.00 Fixed factory overhead 615,000.00 7,175,000.00 Selling and administrative expenses: Variable selling and administrative expenses $1,180,000.00 Fixed selling and administrative expenses 210,000.00 1,390,00.00 Required: • Prepare an income statement according to the absorption costing concept. • Prepare an income statement according to the variable costing concept. • What is the reason for the difference in the amount of Operating income reported in (a) and (b)?
Transcribed Image Text:Crazy Mountain Sports Inc. assembles and sells snowmobile engines. The company began operations on March 1 and operated at 100% of capacity during the first month. The following data summarize the results for March: Sales (32,000 units) 8,000,000.00 Production costs (41,000 units): Direct materials $3,280,000.00 Direct labor 2,255,000.00 Variable factory overhead 1,025,000.00 Fixed factory overhead 615,000.00 7,175,000.00 Selling and administrative expenses: Variable selling and administrative expenses $1,180,000.00 Fixed selling and administrative expenses 210,000.00 1,390,00.00 Required: • Prepare an income statement according to the absorption costing concept. • Prepare an income statement according to the variable costing concept. • What is the reason for the difference in the amount of Operating income reported in (a) and (b)?
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