eBook Show Me How Income Statements under Absorption and Variable Costing Shawne

Question

eBook Show Me How Income Statements under Absorption and Variable Costing Shawnee Motors Inc. assembles and sells snowmobile engines. 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 (2,000 units) Production costs (2,400 units): $600,000 Direct materials Direct labor Variable factory overhead Fixed factory overhead $300,000 115,200 43,200 21,600 480,000 Selling and administrative expenses: Variable selling and administrative expenses $50,000 ?) Fixed selling and administrative expenses 22,000 72,000 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 v Gross profit 125 X 48 X 18 X

Explanation / Answer

a.

Shawnee Motors Inc. Absorption Costing Income Statement For the month ended August 31 Sales $ 600,000 Cost of Goods Sold ( $ 480,000 / 2,400 ) x 2,000 400,000 Gross Profit $ 200,000 Selling and Administrative Expenses 72,000 Income from Operations $ 128,000

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