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 (10,000 units) Production costs (13,000 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 Gallatin County Motors Inc. Absorption Costing Income Statement For the Month Ended July 31 If required, round interim per-unit calculations to the nearest cent. Gallatin County Motors Inc. Variable Costing Income Statement For the Month Ended July 31 $1,500,000 $721,500 345,800 172,900 115,700 1,355,900 $210.200 a. Prepare an income statement according to the absorption costing concept. Fixed costs: 81,400 291,600 b. Prepare an income statement according to the variable costing concept. Check My Work c. What is the reason for the difference in the amount of operating income reported in (a) and (b)? Under the p method, the fixed manufacturing cost included in the cost of goods sold is matched with the all of the fixed manufacturing revenues. Under ( , 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 Previous Next >
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 (10,000 units) Production costs (13,000 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 Gallatin County Motors Inc. Absorption Costing Income Statement For the Month Ended July 31 If required, round interim per-unit calculations to the nearest cent. Gallatin County Motors Inc. Variable Costing Income Statement For the Month Ended July 31 $1,500,000 $721,500 345,800 172,900 115,700 1,355,900 $210.200 a. Prepare an income statement according to the absorption costing concept. Fixed costs: 81,400 291,600 b. Prepare an income statement according to the variable costing concept. Check My Work c. What is the reason for the difference in the amount of operating income reported in (a) and (b)? Under the p method, the fixed manufacturing cost included in the cost of goods sold is matched with the all of the fixed manufacturing revenues. Under ( , 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 Previous Next >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:Problem Set: Module 6
1. TMM.07.05
2. EX.07.12.ALGO
3. EX.07.02.ALGO
4. EX.07.05.ALGO
5. TMM.07.01
Progress: 3/5 items
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Income Statements under Absorption Costing and Variable
Costing
Sales (10,000 units)
Production costs (13,000 units)
Direct materials
Direct labor
Variable factory overhead
Fixed factory overhead
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:
Selling and administrative expenses
Variable selling and administrative expenses.
Fixed selling and administrative expenses
+
Gallatin County Motors Inc.
Variable Costing Income Statement
For the Month Ended July 31
39
$721,500
345,800
172,900
115,700
Fixed costs:
$210,200
81,400
$1,500,000
If required, round interim per-unit calculations to the nearest
cent.
Check My Work
1,355,900
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
291,600
b. Prepare an income statement according to the variable
costing concept.
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
Previous Next >
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