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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 (16,000 units)   $1,920,000   Production costs (21,000 units):     Direct materials $932,400     Direct labor 447,300     Variable factory overhead 224,700     Fixed factory overhead 149,100   1,753,500   Selling and administrative expenses:     Variable selling and administrative expenses $271,800     Fixed selling and administrative expenses 105,200   377,000   If required, round interim per-unit calculations to the nearest cent. Question Content Area

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 (16,000 units)   $1,920,000   Production costs (21,000 units):     Direct materials $932,400     Direct labor 447,300     Variable factory overhead 224,700     Fixed factory overhead 149,100   1,753,500   Selling and administrative expenses:     Variable selling and administrative expenses $271,800     Fixed selling and administrative expenses 105,200   377,000   If required, round interim per-unit calculations to the nearest cent. Question Content Area

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter7: Variable Costing For Management analysis
Section: Chapter Questions
Problem 3E: Fresno Industries Inc. manufactures and sells high-quality camping tents. The company began...
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  1. 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 (16,000 units)   $1,920,000  
    Production costs (21,000 units):    
    Direct materials $932,400    
    Direct labor 447,300    
    Variable factory overhead 224,700    
    Fixed factory overhead 149,100   1,753,500  
    Selling and administrative expenses:    
    Variable selling and administrative expenses $271,800    
    Fixed selling and administrative expenses 105,200   377,000  

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

    Question Content Area

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

    Gallatin County Motors Inc.Absorption Costing Income StatementFor the Month Ended July 31
     
    		 $- Select -
     
    		 - Select -
     
    		 $- Select -
     
    		 - Select -
     
    		 $- Select -
     

    Question Content Area

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

    Gallatin County Motors Inc.Variable Costing Income StatementFor the Month Ended July 31
     
    		   $- Select -
     
    		   - Select -
     
    		   $- Select -
     
    		   - Select -
     
    		   $- Select -
    Fixed costs:    
     
    		 $- Select -  
     
    		 - Select -  
     
    		   - Select -
     
    		   $- Select -
     

    Question Content Area

    c.  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 inventory change. Thus, when inventory increases, the 

     

     income statement will have a higher operating income.

     
     
  2.  
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