Absorption and Variable Costing Income Statements for Two Months and Analysis During the first month of operations ended July 31, Head Gear Inc. manufactured 27,800 hats, of which 25,900 were sold Operating data for the month are summarized as follows: Sales $233,100 Manufacturing costs Direct materials $141,780 Direct labor 36,140 Variable manufacturing cost 16,680 Fixed manufacturing cost 13,900 208,500 Selling and administrative expenses Variable $12,950 Fixed 9,450 22,400 During August, Head Gear Inc, manufactured 24,000 hats and sold 25,900 hats. Operating data for August are summarized as follows: Sales $233,100 Manufacturing costs: Direct materials $122.400 Direct labor 31,200 Variable manufacturing cost 14,400 Fixed manufacturing cost 13,900 181.900 Selling and administrative expenses: Variable $12.950 Fixed 9,450 22.400 1a. Prepare income statement for July using the absorption costing concept. Head Gear Inc. Absorption Costing Income Statement For the Month Ended July 31 Sales Cost of goods sold: Direct labor x Direct labor X Inventory, August 1 x Gross profit Contribution margin X Operating income Feedback Check My Work 1a. Sales - (cost of goods manufactured - ending inventory) - Gross profit gross profit-selling and administrative expenses operating income "(Manufactured Units - Sold units) (total manufacturing costs/manufactured units) 1b. Prepare income statement for August using the absorption costing concept. Head Gear Inc. Absorption Costing Income Statement For the Month Ended August 31 eBook Show Me How Print Item Cost of goods sold: Feedback Check My Work 16. Sales - (cost of goods manufactured - ending inventory") = Gross profit gross profit - S "(Manufactured Units - Sold units) x (total manufacturing costs/manufactured unita) 2a. Prepare income statement for July using the variable costing concept. Head Gear Inc. Variable Costing Income Statement For the Month Ended July 31 Variable cost of goods sold: Fixed costs: Feedback Check My Work 2a. Sales - variable cost of goods sold = Manufacturing margin: Manufacturing naprgin - variable sellir manufacturing costs + fixed selling and administrative expenses) = operating income "Variable cost of goods sold = Variable cost of goods manufactured - [(Manufactured Units - Sold units 2b. Prepare income statement for August using the variable costing concept. Head Gear Inc. Variable Costing Income Statement For the Month Ended August 31 Variable cost of goods sold: LDD Fixed costs: Feedback Check My Work 26. Sales - Variable cost of goods sold' - Manufacturing margin: Manufacturing margin-variable selling and administrative expenses = Contribution margin: Contribution margin-(fixed manufacturing costs + fixed selling and administrative expenses) operating income "Variable cost of goods sold Variable cost of goods manufactured - Manufactured Units - Sold units) x (variable manufacturing costs/manufactured units] 3a. For July, operating income reported under costing is less than costing due to part of manufacturing costs that are expensed 3b. When large changes in inventory levels occur from one period to the next, it is possible for management to misinterpret such increases cor decreases) in operating Income as due to changes in a. costs b. prices c. sales volume d."sales volume", "prices and costs are correct None of the chaire lect