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 (13,500 units) $1,755,000 Production costs (17,000 units): Direct materials $817,700 Direct labor 392,700 Variable factory overhead 195,500 Fixed factory overhead 130,900 1,536,800 Selling and administrative expenses: Variable selling and administrative expenses $238,200 Fixed selling and administrative expenses 92,200 330,400 If 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 Income Statement For the Month Ended July 31 $fill in the blank f4f54b00d04e04c_2 fill in the blank f4f54b00d04e04c_4 $fill in the blank f4f54b00d04e04c_6 fill in the blank f4f54b00d04e04c_8 $fill in the blank f4f54b00d04e04c_10 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 $fill in the blank 67041d087038fff_2 fill in the blank 67041d087038fff_4 $fill in the blank 67041d087038fff_6 fill in the blank 67041d087038fff_8 $fill in the blank 67041d087038fff_10 Fixed costs: $fill in the blank 67041d087038fff_12 fill in the blank 67041d087038fff_14 fill in the blank 67041d087038fff_16 $fill in the blank 67041d087038fff_18 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.
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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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 (13,500 units) $1,755,000 Production costs (17,000 units): Direct materials $817,700 Direct labor 392,700 Variable factory overhead 195,500 Fixed factory overhead 130,900 1,536,800 Selling and administrative expenses: Variable selling and administrative expenses $238,200 Fixed selling and administrative expenses 92,200 330,400
If 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 Income Statement For the Month Ended July 31 $fill in the blank f4f54b00d04e04c_2 fill in the blank f4f54b00d04e04c_4 $fill in the blank f4f54b00d04e04c_6 fill in the blank f4f54b00d04e04c_8 $fill in the blank f4f54b00d04e04c_10 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 $fill in the blank 67041d087038fff_2 fill in the blank 67041d087038fff_4 $fill in the blank 67041d087038fff_6 fill in the blank 67041d087038fff_8 $fill in the blank 67041d087038fff_10 Fixed costs: $fill in the blank 67041d087038fff_12 fill in the blank 67041d087038fff_14 fill in the blank 67041d087038fff_16 $fill in the blank 67041d087038fff_18 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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