During the first month of operations ended March 31, 2016, Hip and Conscious Clothing Company produced 55,500 designer cowboy hats, of which 51,450 were sold. Operating data for the month are summarized as follows:
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. $771,750
Manufacturing costs:
Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $471,750
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .127,650
Variable manufacturing cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61,050
Fixed manufacturing cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,500. . . . . . . 715,950
Selling and administrative expenses:
Variable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $36,015
Fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,725. . . . . . . . 61,740
During April, Hip and Conscious Clothing produced 47,400 designer cowboy hats and sold 51,450 cowboy hats. Operating data for April are summarized as follows:
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $771,750
Manufacturing costs:
Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $402,900
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,020
Variable manufacturing cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,140
Fixed manufacturing cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55,500. . . . . . . . . .619,560
Selling and administrative expenses:
Variable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36,015
Fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25,725. . . . . . . . . . . 61,740
Instructions
1. Using the absorption costing concept, prepare income statements for (a) March and (b) April.
2. Using the variable costing concept, prepare income statements for (a) March and (b) April.
3. a. Explain the reason for the differences in the amount of income from operations in (1) and (2) for March.
b. Explain the reason for the differences in the amount of income from operations in (1) and (2) for April.
4. Based on your answers to (1) and (2), did Hip and Conscious Clothing Company operate more profitably in March or in April? Explain.