Shawnee Motors Inc. assembles and sells MP3 players. The company began operations on August 1 and...
Question:
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 (13,000 units) | $1,560,000 | |
| Production costs (17,000 units): | ||
| Direct materials | $754,800 | |
| Direct labor | 362,100 | |
| Variable factory overhead | 181,900 | |
| Fixed factory overhead | 120,700 | 1,419,500 |
| Selling and administrative expenses: | ||
| Variable selling and administrative expenses | $220,000 | |
| Fixed selling and administrative expenses | 85,200 | 305,200 |
a. Prepare an income statement according to the absorption costing concept.
b. Prepare an income statement according to the variable costing concept.
Absorption and Variable Costing Income Statements:
The income statements that companies include in their published financial statements must be prepared using the absorption costing concept. However, many companies prepare interest financial statements using the variable costing concept and reporting format, because it provides relevant information for decision-making and cost control.
Answer and Explanation: 1
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You will see that the income statements differ in their format, but more importantly also in the way it treats the fixed manufacturing overheads. In...
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Variable Costing: Method, Formula & Advantages
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Variable costing assigns the cost of materials and supplies as needed in the production process. Learn about this method in accounting, understand the formula for determining variable cost, and explore its advantages and some examples.
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