Frigid Motors Inc. assembles and sells snowmobile engines. Thecompany began operations on July 1, 2016, and operated at 100% ofcapacity during the first month. The following data summarize theresults for July:
1 | Sales (32,000 units) | | $8,000,000.00 |
2 | Production costs (41,000 units): | | |
3 | Direct materials | $3,280,000.00 | |
4 | Direct labor | 2,255,000.00 | |
5 | Variable factory overhead | 1,025,000.00 | |
6 | Fixed factory overhead | 615,000.00 | 7,175,000.00 |
7 | Selling and administrative expenses: | | |
8 | Variable selling and administrative expenses | $1,180,000.00 | |
9 | Fixed selling and administrative expenses | 210,000.00 | 1,390,000.00 |
| Required: |
| A. | Prepare an income statementaccording to the absorption costing concept.* |
| B. | Prepare an income statementaccording to the variable costing concept. A colon (:) willautomatically appear if it is required.* |
| C. | What is the reason for thedifference in the amount of income from operations reported in (A)and (B)? | * Refer to the lists of Labelsand Amount Descriptions for the exact wording of the answer choicesfor text entries. Be sure to complete the statement heading. Enterall amounts as positive numbers. |
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