Question

# Income Statements under Absorption and Variable Costing Shawnee Motors Inc. assembles and sells MP3 players. The...

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 (16,000 units) \$2,240,000 Production costs (21,000 units): Direct materials \$1,087,800 Direct labor 522,900 Variable factory overhead 260,400 Fixed factory overhead 174,300 2,045,400 Selling and administrative expenses: Variable selling and administrative expenses \$317,000 Fixed selling and administrative expenses 122,700 439,700

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 \$ Cost of goods sold Gross profit \$ Selling and administrative expenses Income from operations \$

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 \$ Variable cost of goods sold Manufacturing margin \$ Variable selling and administrative expenses Contribution margin \$ Fixed costs: Fixed factory overhead \$ Fixed selling and administrative expenses Total fixed costs Income from operations \$

 a Shawnee Motors Inc. Absorption Costing Income Statement For the Month Ended August 31 Sales 2240000 Cost of goods sold 1558400 =2045400/21000*16000 Gross profit 681600 Selling and administrative expenses 439700 =317000+122700 Income from operations 241900 b Shawnee Motors Inc. Variable Costing Income Statement For the Month Ended August 31 Sales 2240000 Variable cost of goods sold 1425600 =(1087800+522900+260400)/21000*16000 Manufacturing margin 814400 Variable selling and administrative expenses 317000 Contribution margin 497400 Fixed costs: Fixed factory overhead 174300 Fixed selling and administrative expenses 122700 Total fixed costs 297000 Income from operations 200400

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