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 (14,500 units) Production costs (19,000 units): Direct materials Direct labor Variable factory overhead Fixed factory overhead Selling and administrative expenses: Variable selling and administrative expenses Fixed selling and administrative expenses $703,000 338,200 169,100 112,100 1,322,400 $205,000 79,300 Feedback If required, round interim per-unit calculations to the nearest cent. Gallatin County Motors Inc. Absorption Costing Income Statement For the Month Ended July 31 Sales ✔ 1,450,000 Cost of goods sold ✔ 1,322,400 X Gross profit ✓ Selling and administrative expenses Operating income ✔ Check My Work a. Prepare an income statement according to the absorption costing concept. $1,450,000 284,300 284,300 a. Under absorption costing, the cost of goods manufactured includes direct materials, direct labor, and factory overhead costs. Both fixed and variable factory costs are included as part of factory overhead. Gallatin County Motors Inc. b. Prepare an income statement according to the variable costing concept.
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 (14,500 units) Production costs (19,000 units): Direct materials Direct labor Variable factory overhead Fixed factory overhead Selling and administrative expenses: Variable selling and administrative expenses Fixed selling and administrative expenses $703,000 338,200 169,100 112,100 1,322,400 $205,000 79,300 Feedback If required, round interim per-unit calculations to the nearest cent. Gallatin County Motors Inc. Absorption Costing Income Statement For the Month Ended July 31 Sales ✔ 1,450,000 Cost of goods sold ✔ 1,322,400 X Gross profit ✓ Selling and administrative expenses Operating income ✔ Check My Work a. Prepare an income statement according to the absorption costing concept. $1,450,000 284,300 284,300 a. Under absorption costing, the cost of goods manufactured includes direct materials, direct labor, and factory overhead costs. Both fixed and variable factory costs are included as part of factory overhead. Gallatin County Motors Inc. b. Prepare an income statement according to the variable costing concept.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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