Shawnee Motors Inc. assembles and sells snowmobile engines. The company began operations on August I and operated at 100% of capacity during the first month. The following data summarize the results for August Sales (2,000 units) $600,000
Production costs (2,400 units)
Direct materials $300,000
Direct labor 115,200
variable factory overhead 43,200
fixed factory overhead 21,600 480,000
Selling and administrative expenses:
Variable selling and administrative expenses $50,000
Fixed selling and administrative expenses 22,000 72,000
A. Prepare an income statement according to the absorption costing concept.
B. Prepare an income statement according to the variable costing concept.
C. What is the reason for the difference in the amount of income from operations reported in (A) and (B)?