Frigid Motors Inc. assembles and sells snowmobile engines. The company began operations on July 1, 2016, and operated at 100% of capacity during the first month. The following data summarize the results for July:
1
Sales (35,000 units)
$8,750,000.00
2
Production costs (42,500 units):
3
Direct materials
$4,250,000.00
4
Direct labor
2,125,000.00
5
Variable factory overhead
1,062,500.00
6
Fixed factory overhead
637,500.00
8,075,000.00
7
Selling and administrative expenses:
8
Variable selling and administrative expenses
$1,150,000.00
9
Fixed selling and administrative expenses
200,000.00
1,350,000.00
Required:
A. Prepare an income statement according to the absorption costing concept.*
B. Prepare an income statement according to the variable costing concept. A colon (:) will automatically appear if it is required.*
C. What is the reason for the difference in the amount of income from operations reported in (A) and (B)?