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1. During the first month of operations ended January 31, Wardner Apparel produced 80,000 designer cowboy hats, of which 72,000 were sold. Operating data
1. During the first month of operations ended January 31, Wardner Apparel produced 80,000 designer cowboy hats, of which 72,000 were sold. Operating data for the month are summarized as follows: Category Sales Manufacturing Costs Direct Materials Direct Labor Variable Manufacturing Costs Fixed Manufacturing Costs Total Manufacturing Costs Selling and Admin Expenses: Variable Fixed Total Selling and Admin Expenses Dollar Amount Subtotals/Totals $4,560,000 $1,500,000 1,480,000 220,000 420,000 3,620,000 144,000 35,000 179,000 During February, Wardner Apparel produced 64,000 designer cowboy hats and sold 72,000 cowboy hats. Operating data for February are summarized as follows: Category Sales Manufacturing Costs: Direct Materials Direct Labor Variable Manufacturing Costs Fixed Manufacturing Costs Dollar Amount Subtotals/Totals $4,560,000 1,350,000 1,200,000 190,000 420,000 3,160,000 Total Manufacturing Costs Selling and Admin Expenses: Variable 144,000 Fixed 35,000 Total Selling and Admin Expenses 179,000 Instructions on the next page. Problem 1 Instructions a. Using absorption costing, prepare income statements for (1) January and (i) February b. Using variable costing, prepare income statements for (i) January and (4) February. c. Explain the reason for the differences in the amount of income from operations in (a) and (b) for January d. Explain the reason for the differences in the amount of income from operations in (a) and (b) for February. e. Based on your answers to (a) and (b), did Wardner Apparel operate more profitably in January or in February? Explain.
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