Shawnee Motors Inc. assembles and sells MP3 players. The company began operation

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 (10,000 units) Production costs (13,000 units): $1,000,000 Direct materials Direct labor Variable factory overhead Fixed factory overhead $481,000 231,400 115,700 76,700 904,800 Selling and administrative expenses: Variable selling and administrative expenses $140,200 Fixed selling and administrative expenses 54,300 194,500 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 1,000,000 Sales Cost of goods sold Gross profit Selling and administrative expenses194 500 Previous Next Check My Work

Explanation / Answer

a) Absorption costing income statement For the month ended August 31 Particulars Amount Sales 1000000 Less: Cost of goods sold 904800 Gross profit (1000000-904800) 95200 Less: Selling & administrative expenses 194500 Income from operations (95200-194500) -99300 b) Variable costing income statement For the month ended August 31 Particulars Amount Amount Sales 1000000 Less: Variable Cost of goods sold (481000+231400+115700) 828100 Manufacturing margin (1000000-828100) 171900 Less: Variable Selling & administrative expenses 140200 Contribution margin (171900-140200) (a) 31700 Fixed costs: Fixed factory overhead                             76700 Fixed Selling and administrative expenses 54300 Total fixed ccosts (76700+54300) (b) 131000 Income from operations (a-b) -99300

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