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 (17,000 units) $2,040,000 Production costs (22,000 units): Direct materials $976,800 Direct labor 468,600 Variable factory overhead 235,400 Fixed factory overhead 156,200 1,837,000 Selling and administrative expenses: Variable selling and administrative expenses $284,700 Fixed selling and administrative expenses 110,200 394,900 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 Sales $2,040000.00 Cost of goods sold fill in the blank Gross profit $620,500.00 Selling and administrative expenses 394,900.00 Income from operations $225,600.00 Feedback a. Under absorption costing, the cost of goods manufactured includes direct materials, direct labor, and factory overhead costs. Both fixed and variable factory costs are included as part of factory overhead. Learning Objective 1. b. Prepare an income statement according to the variable costing concept. Shawnee Motors Inc. Variable Costing Income Statement For the Month Ended August 31 Sales $2,040,000.00 Variable cost of goods sold fill in the blank Manufacturing margin $ fill in the blank Variable selling and administrative expenses 284,700.00 Contribution margin $456,500.00 Fixed costs: Fixed factory overhead $156,200.00 Fixed selling and administrative expenses 110,200.00 Total fixed costs fill in the blank Income from operations $190,100.00

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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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 (17,000 units)		$2,040,000
Production costs (22,000 units):
Direct materials	$976,800
Direct labor	468,600
Variable factory overhead	235,400
Fixed factory overhead	156,200		1,837,000
Selling and administrative expenses:
Variable selling and administrative expenses	$284,700
Fixed selling and administrative expenses	110,200		394,900

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
Sales	$2,040000.00
Cost of goods sold	fill in the blank
Gross profit	$620,500.00
Selling and administrative expenses	394,900.00
Income from operations	$225,600.00

Feedback

a. Under absorption costing, the cost of goods manufactured includes direct materials, direct labor, and factory overhead costs. Both fixed and variable factory costs are included as part of factory overhead.

Learning Objective 1.

b. Prepare an income statement according to the variable costing concept.

Shawnee Motors Inc.
Variable Costing Income Statement
For the Month Ended August 31
Sales		$2,040,000.00
Variable cost of goods sold		fill in the blank
Manufacturing margin		$ fill in the blank
Variable selling and administrative expenses		284,700.00
Contribution margin		$456,500.00
Fixed costs:
Fixed factory overhead	$156,200.00
Fixed selling and administrative expenses	110,200.00
Total fixed costs		fill in the blank
Income from operations		$190,100.00

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