During the first month of operations ended May 31, 2011, The Water Bottle Company produced 33,600 designer water bottles, of which 31,200 were sold. Operating data for the month are summarized as follows:

During June, The Water Bottle Company produced 28,800 designer water bottles and sold 31,200 shirts. Operating data for June are summarized as follows:

Instructions
1. Using the absorption costing concept, prepare income statements for
a. May and
b. June.
2. Using the variable costing concept, prepare income statements for
a. May and
b. June.
3. a. Explain the reason for the differences in the amount of income from operations in (1) and (2) For May.
b. Explain the reason for the differences in the amount of income from operations in (1) and (2) for June.
4. Based on your answers to (1) and (2), did The Water Bottle Company operate more profitably in May or in June?Explain.

Transcribed Image Text:

$287,040 Sales Manufacturing costs: $174,720 47,040 21,840 20,160 Direct materials Variable manufacturing cost- . . . . -.. . . Fixed manufacturing cost.····· 263,760 Selling and administrative expenses: Variable Fixed 9,984 23,712 $287,040 Sales Manufacturing costs: Direct materials ·.. :. ·.. Direct labor Variable manufacturing cost- . .. .-.. - Fixed manufacturing cost. ::::- $149,760 40,320 18,720 20,160 228,960 Selling and administrative expenses: Variable Fixed. ..$ 13,728 9,984 23,712