Frigid Motors Inc. assembles and sells snowmobile engines. The company began operations on July 1, 2016,...

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Accounting

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.

Answer & Explanation Solved by verified expert

3.8 Ratings (352 Votes)

Ans 1 In absorption costing method the unit product cost is the sum of all manufacturing costs per unit whether it is fixed or variable Unit product cost under Absorption Costing Direct materials 3280000 41000 80 Direct labor 2255000 41000 55 Variable Overhead per unit 1025000 41000 25 Fixed overhead per unit 615000 41000 15 Product Cost per unit 175 FRIGID MOTORS INC Absorption Costing Income Statement PARTICULARS See Answer

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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