**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**- **Sales:** `$` - **Variable Cost of Goods Sold:** `$` - **Variable Selling and Administrative Expenses:** `$` - **Total Variable Costs:** `$` - **Contribution Margin:** `$` **Fixed Costs:**- **Fixed Manufacturing Costs:** `$` - **Fixed Selling and Administrative Expenses:** `$` - **Total Fixed Costs:** `$` - **Operating Income:** `$` **c. What is the reason for the difference in the amount of operating income reported in (a) and (b)?**Under the **absorption costing** method, the fixed manufacturing cost included in the cost of goods sold is matched with the revenues. Under **variable costing**, 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 **variable costing** income statement will have a higher operating income. # Income Statements under Absorption Costing and Variable CostingGallatin County Motors Inc. assembles and sells snowmobile engines. The company began operations on July 1 and operated at 100% capacity during the first month. The following data summarize the results for July:**Sales (12,000 units):** $1,920,000**Production costs (15,000 units):**- **Direct materials:** $888,000- **Direct labor:** $426,000- **Variable factory overhead:** $213,000- **Fixed factory overhead:** $142,500 **Total Production Costs:** $1,669,500**Selling and administrative expenses:**- **Variable selling and administrative expenses:** $258,800- **Fixed selling and administrative expenses:** $100,200 **Total Selling and Administrative Expenses:** $359,000If required, round interim per-unit calculations to the nearest cent.## Task**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- [Sales Revenue] : $________- [Cost of Goods Sold] : $________- [Gross Profit] : $________- [Selling and Administrative Expenses] : $________- [Net Income] : $________

The net income is calculated as the difference between the revenue and expenses. The contribution…

Answered: Income Statements under Absorption…

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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1. COMPUTE THE UNIT PRODUCT COST UNDER ABSORPTION COSTING 2. COMPUTE THE UNIT PRODUCT COST UNDER VARIABLE COSTING
Estimated Income Statements, using Absorption and Variable Costing Prior to the first month of operations ending October 31, Marshall Inc. estimated the following operating results: Sales (23,200 x $81) $1,879,200 Manufacturing costs (23,200 units): Direct materials 1,127,520 Direct labor 266,800 Variable factory overhead 125,280 Fixed factory overhead 148,480 Fixed selling and administrative expenses 40,400 Variable selling and administrative expenses 48,800 The company is evaluating a proposal to manufacture 25,600 units instead of 23,200 units, thus creating an ending inventory of 2,400 units. Manufacturing the additional units will not change sales, unit variable factory overhead costs, total fixed factory overhead cost, or total selling and administrative expenses. a. 1. Prepare an estimated income statement, comparing operating results if 23,200 and 25,600 units are manufactured in the absorption costing format. If an amount box does not…
Denton Company manufactures and sells a single product. Cost data for the product are given: Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Total variable cost per unit Fixed costs per month: Fixed manufacturing overhead Fixed selling and administrative Total fixed cost per month July August The product sells for $48 per unit. Production and sales data for July and August, the first two months of operations, follow: Units Produced 27,000 27,000 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income $ 108,000 172,000 $ 280,000 Required: 1. Determine the unit product cost under: a. Absorption costing. b. Variable costing. $ 5 11 3 2 $ 21 Units Sold 23,000 31,000 The company's Accounting Department has prepared the following absorption costing income statements for July and August: July August $ 1,104,000 $ 1,488,000 529,000 575,000 218,000 $ 357,000 713,000 775,000 234,000…
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 (17,000 units) $2,210,000 Production costs (22,000 units): Direct materials $1,058,200 Direct labor 508,200 Variable factory overhead 253,000 Fixed factory overhead 169,400 1,988,800 Selling and administrative expenses: Variable selling and administrative expenses $308,300 Fixed selling and administrative expenses 119,300 427,600 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 72b9f3f8dfebff0_2 fill in the blank…
Income Statements under Absorption Costing and Variable Costing Fresno Industries Inc. manufactures and sells high-quality camping tents. The company began operations on January 1 and operated at 100% of capacity (161,000 units) during the first month, creating an ending inventory of 20,000 units. During February, the company produced 141,000 units during the mont but sold 161,000 units at $520 per unit. The February manufacturing costs and selling and administrative expenses were as follows: Number of Units Unit Total Cost Cost Manufacturing costs in February 1 beginning inventory: Variable 20,000 $260.00 $5,200,000 Fixed 20,000 40.00 800,000 Total $300.00 $6,000,000 Manufacturing costs in February: Variable Fixed Total 141,000 $260.00 $36,660,000 141,000 46.20 6,514,200 $306.20 $43,174,200 Selling and administrative expenses in February: Variable 161,000 $30.80 $4,958,800 Fixed 161,000 4.00 644,000 $34.80 $5,602,800 Total This information has been collected in the Microsoft Excel…
Sims Company began operations on January 1. Its cost and sales information for this year follow. Direct materials $ 30 per unit Direct labor $ 50 per unit Variable overhead $ 40 per unit Fixed overhead $ 6,600,000 per year Variable selling and administrative expenses $ 11 per unit Fixed selling and administrative expenses $ 4,250,000 per year Units produced 110,000 units Units sold 80,000 units Sales price $ 360 per unit 1. Prepare an income statement for the year using variable costing.2. Prepare an income statement for the year using absorption costing.
The section of Waterways that produces controllers for the company provided the following information. Sales for month of February 4,200 Variable manufacturing cost per unit $10.00 Sales price per unit $43.00 Fixed manufacturing overhead cost (per month for controllers) $83,000 Variable selling and administrative expenses per unit $2.90 Fixed selling and administrative expenses (per month for controllers) $13,250 Using this information for the controllers, determine the contribution margin ratio, the degree of operating leverage, the break-even point in dollars, and the margin of safety ratio for Waterways Corporation on this product. Contribution Margin Ratio (Round to 0 decimal places, e.g. 25%.) % Degree of Operating Leverage (Round to 2 decimal places, e.g. 5.25.) Break-even Point in Dollars $ Margin of Safety Ratio (Round to 1 decimal place, e.g. 5.2%.) %
Absorption and Variable Costing Income Statements During the first month of operations ended July 31, YoSan Inc. manufactured 2,400 flat panel televisions, of which 2,000 were sold. Operating data for the month are summarized as follows: Line Item Description Amount Amount Sales $2,150,000 Manufacturing costs: Direct materials $960,000 Direct labor 420,000 Variable manufacturing cost 156,000 Fixed manufacturing cost 288,000 1,824,000 Selling and administrative expenses: Variable $204,000 Fixed 96,000 300,000 Required: Question Content Area 1. Prepare an income statement based on the absorption costing concept. YoSan Inc.Absorption Costing Income StatementFor the Month Ended July 31 Line Item Description Amount Amount - Cost of goods sold: $- Select - Question Content Area 2. Prepare an income statement…
The following information was collected for the first year of manufacturing for Appliance Apps: Direct Materials per Unit $2.50 Direct Labor per Unit $1.50 Variable Manufacturing Overhead per Unit $0.25 Variable Selling and Administration Expenses $1.75 Units Produced 39,000 Units Sold 35,000 Sales Price $12 Fixed Manufacturing Expenses $117,000 Fixed Selling and Administration Expenses $20,000 Question Content Area Prepare an income statement under variable costing method. Appliance AppsIncome Statement $- Select - - Select - $- Select - - Select - $- Select - - Select - - Select - $- Select - Question Content Area Prepare a reconciliation to the income under the absorption method. Appliance AppsReconciliation $- Select - - Select - $- Select -
All information included
Income statements under absorption 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 (3,500 units) $2,345,000 Production costs (4,000 units): Direct materials $1,152,400 Direct labor 495,600 Variable factory overhead 80,800 Fixed factory overhead 126,800 1,855,600 Selling and administrative expenses: Variable selling and administrative expenses $57,500 Fixed selling and administrative expenses 24,100 81,600 This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Open spreadsheet a. Prepare an income statement according to the absorption costing concept. Gallatin County Motors Inc. Absorption Costing Income…
Diego Company manufactures one product that is sold for $77 per unit in two geographic regions—the East and West regions. The following information pertains to the company’s first year of operations in which it produced 59,000 units and sold 54,000 units. Variable costs per unit: Manufacturing: Direct materials $ 27 Direct labor $ 10 Variable manufacturing overhead $ 2 Variable selling and administrative $ 3 Fixed costs per year: Fixed manufacturing overhead $ 1,298,000 Fixed selling and administrative expense $ 662,000 The company sold 41,000 units in the East region and 13,000 units in the West region. It determined that $330,000 of its fixed selling and administrative expense is traceable to the West region, $280,000 is traceable to the East region, and the remaining $52,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only…

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