Prepare an income statement according to variable costing

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Question - 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 (14,500 units)


$2,030,000

Production costs (19,000 units):



Direct materials

$984,200


Direct labor

473,100


Variable factory overhead

235,600


Fixed factory overhead

157,700

1,850,600

Selling and administrative expenses:



Variable selling and administrative expenses

$286,800


Fixed selling and administrative expenses

111,000

397,800

If required, round interim per-unit calculations to the nearest cent.

Required -

a. Prepare an income statement according to the absorption costing concept.

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)?

Reference no: EM133177906

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