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% of capacity during the first month. The following data summarize the results for July:Sales (18,500 units) $2,405,000 Production costs (24,000 units): Direct materials$1,154,400 Direct labor554,400 Variable factory overhead276,000 Fixed factory overhead184,800 2,169,600 Selling and administrative expenses: Variable selling and administrative expenses$336,300 Fixed selling and administrative expenses130,200 466,500 If required, round interim per-unit calculations to the nearest cent.a. Prepare an income statement according to the absorption costing concept. E Managerial Accounting - Goc xB 3-1 Problem Set: Module Thr x* CengageNOWv2 | Online tea XxCengage LearningO Prepare an income statemen X+A v2.cengagenow.com/ilrn/takeAssignment/takeAssignmentMain.do?invoker=&takeAssignmentSessionLocator=&inprogress=falseUpdate :Problem Set: Module 6O eBookShow Me Howa. Prepare an income statement according to the absorption costing concept.1. EX.07.02.ALGOGallatin County Motors Inc.Absorption Costing Income StatementFor the Month Ended July 312. TMM.07.01Sales732,600X3. EX.07,12.ALGOCost of goods sold4. EX.07.05.ALGOGross profit5. TMM.07.05Selling and administrative expensesOperating incomeFeedbackV Check My Worka. Under absorption costing, the cost of goods manufactured includes direct materials, direct labor, and factory overhead costs. Both fixed andvariable factory costs are included as part of factory overhead.b. Prepare an income statement according to the variable costing concept.Gallatin County Motors Inc.Variable Costing Income StatementFor the Month Ended July 31Check My WorkNextProgress: 1/5 items6:41 PMP Type here to search9952°F12/19/2021 Managerial Accounting - Goc x B 3-1 Problem Set: Module Thr X* CengageNOWv2 | Online tea xCengage LearningX O Prepare an income statemen x +A v2.cengagenow.com/ilrm/takeAssignment/takeAssignmentMain.do?invoker=&takeAssignmentSessionLocator=&inprogress=falseUpdate :Problem Set: Module 6O eBookеВookShow Me How1. EX.07.02.ALGO2. TMM.07.01Fixed costs:3. EX.07,12.ALGO4. EX.07.05.ALGO5. TMM.07.05Feedbackc. 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 inventorychange. Thus, when inventory increases, theincome statement will have a higher operating income.FeedbackV Check My Workc. Consider what causing the difference in operating income reported under the two methods. There is a need for management to exercise carein interpreting operating income reported under absorption costing when significant changes in inventory levels occur.Check My WorkNext)Progress: 1/5 items6:41 PMP Type here to search99+W52°F12/19/2021

Name: Income Statements under Absorption Costing and Variable CostingGallati
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Description: 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% of capacity during the first month. The following data summ

The income statement is prepared to find the net income or loss incurred during the period.

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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Sales (18,500 units)		$2,405,000
Production costs (24,000 units):
Direct materials	$1,154,400
Direct labor	554,400
Variable factory overhead	276,000
Fixed factory overhead	184,800		2,169,600
Selling and administrative expenses:
Variable selling and administrative expenses	$336,300
Fixed selling and administrative expenses	130,200		466,500