Question

**Please use numbers given** Please answer the blank boxes in (a) and (b) - thank you!! :)

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: $2,625,000 Sales (17,500 units) Production costs (23,000 units): Direct materials Direct labor $1,276,500 611,800 305,900 204,700 Variable factory overhead Fixed factory overhead 2,398,900 Selling and administrative expenses: Variable selling and administrative expenses $371,800 143,900 Fixed selling and administrative expenses 515,700 If required, round interim per-unit calculations to the nearest cent. a. Prepare an income statement according to the absorption costing concept.

Answer 1

Solution a:

Shawnee Motors Inc.
Income Statement (Absorption Costing)
For the Month ended August 31
Sales	$26,25,000
Less: Cost Of Goods sold [$2398900/23000*17500]	$18,25,250
Gross Profit	$7,99,750
Less: Selling and administrative Expenses	$5,15,700
Income from Operation	$2,84,050

Solution b:

Shawnee Motors Inc.
Income Statement (Variable Costing)
For the month ended August 31
Sales		$26,25,000
Variable Cost of Goods sold [($1276500+$611800+$305900)/23000*17500]		$16,69,500
Manufacturing Margin		$9,55,500
Variable Selling and administrative Expenses		$3,71,800
Contribution margin		$5,83,700
Less: Fixed Expenses
Fixed Factory Overhead	$2,04,700
Fixed Selling and administrative expenses	$1,43,900
Total Fixed costs		$3,48,600
Income from Operation		$2,35,100