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 (16,000 units) $1,920,000 Production costs (21,000 units): Direct materials $932,400 Direct labor 447,300 Variable factory overhead 224,700 Fixed factory overhead 149,100 1,753,500 Selling and administrative expenses: Variable selling and administrative expenses $271,800 Fixed selling and administrative expenses 105,200 377,000 If required, round interim per-unit calculations to the nearest cent. Question Content Area
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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 (16,000 units) $1,920,000 Production costs (21,000 units): Direct materials $932,400 Direct labor 447,300 Variable factory overhead 224,700 Fixed factory overhead 149,100 1,753,500 Selling and administrative expenses: Variable selling and administrative expenses $271,800 Fixed selling and administrative expenses 105,200 377,000
If required, round interim per-unit calculations to the nearest cent.
Question Content Area
Gallatin County Motors Inc.Absorption Costing Income StatementFor the Month Ended July 31a. Prepare an income statement according to the absorption costing concept.
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Gallatin County Motors Inc.Variable Costing Income StatementFor the Month Ended July 31b. Prepare an income statement according to the variable costing concept.
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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.
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