Income Statements under Absorption and Variable Costing Shawnee Motors Inc. assembles and sells MP3 players. The company began operations on August 1 and operated at 100% of capacity during the first month. The following data summarize the results for August: Sales (9,000 units) $1,260,000 Production costs (12,000 units): Direct materials $621,600 Direct labor 298,800 Variable factory overhead 148,800 Fixed factory overhead 99,600 1,168,800 Selling and administrative expenses: Variable selling and administrative expenses $181,200 Fixed selling and administrative expenses 70,100 251.300 If required, round interim per-unit calculations to the nearest cent. a. Prepare an income statement according to the absorption costing concept. Shawnee Motors Inc. Absorption Costing Income Statement For the Month Ended August 31
Income Statements under Absorption and Variable Costing Shawnee Motors Inc. assembles and sells MP3 players. The company began operations on August 1 and operated at 100% of capacity during the first month. The following data summarize the results for August: Sales (9,000 units) $1,260,000 Production costs (12,000 units): Direct materials $621,600 Direct labor 298,800 Variable factory overhead 148,800 Fixed factory overhead 99,600 1,168,800 Selling and administrative expenses: Variable selling and administrative expenses $181,200 Fixed selling and administrative expenses 70,100 251.300 If required, round interim per-unit calculations to the nearest cent. a. Prepare an income statement according to the absorption costing concept. Shawnee Motors Inc. Absorption Costing Income Statement For the Month Ended August 31
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:b. Prepare an income statement according to the variable costing concept.
Shawnee Motors Inc.
Variable Costing Income Statement
For the Month Ended August 31
%24
$
$
Fixed costs:
$
c. What is the reason for the difference in the amount of income from operations 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 income from operations than will the variable costing income statement.
Transcribed Image Text:Income Statements under Absorption and Variable Costing
Shawnee Motors Inc. assembles and sells MP3 players. The company began operations on August 1 and operated at 100% of capacity during the first month. The following data summarize the results for August:
Sales (9,000 units)
$1,260,000
Production costs (12,000 units):
Direct materials
$621,600
Direct labor
298,800
Variable factory overhead
148,800
Fixed factory overhead
99,600
1,168,800
Selling and administrative expenses:
Variable selling and administrative expenses
$181,200
Fixed selling and administrative expenses
70,100
251,300
If required, round interim per-unit calculations to the nearest cent.
a. Prepare an income statement according to the absorption costing concept.
Shawnee Motors Inc.
Absorption Costing Income Statement
For the Month Ended August 31
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