Absorption and Variable Costing Income Statements for Two Months and Analysis During the first month of operations ended July 31, Head Gear Inc. manufactured 32,700 hats, of which 30,700 were sold. Operating data for the month are summarized as follows: Sales $282,440 Manufacturing costs: Direct materials $170,040 Direct labor 45,780 Variable manufacturing cost 19,620 Fixed manufacturing cost 19,620 255,060 Selling and administrative expenses: Variable $15,350 Fixed 11,210 26,560 During August, Head Gear Inc. manufactured 28,700 hats and sold 30,700 hats. Operating data for August are summarized as follows: Sales $282,440 Manufacturing costs: Direct materials $149,240 40,180 Direct labor Variable manufacturing cost 17,220 Fixed manufacturing cost 19,620 226,260 Selling and administrative expenses: Variable $15,350 Fixed 11,210 26,560 Required: 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 282,440 Cost of goods sold: Cost of goods manufactured 255,060 Inventory, July 31 15,600 Total cost of goods sold Gross profit Selling and administrative expenses 26,560 Operating income $ Feedback 1b. Prepare income statement for August using the absorption costing concept. Head Gear Inc. Absorption Costing Income Statement For the Month Ended August 31 Sales 282,440 Cost of goods sold: Inventory, August 17 Cost of goods manufactured Total cost of goods sold Gross profit Selling and administrative expenses Operating income Feedback 2a. Prepare income statement for July using the variable costing concept. Head Gear Inc. Variable Costing Income Statement For the Month Ended July 31 Sales 282,440 Variable cost of goods sold: Variable cost of goods manufactured Inventory, July 31 Total variable cost of goods sold Manufacturing margin Variable selling and administrative expenses Contribution margin Fixed costs: Fixed manufacturing costs Fixed selling and administrative expenses Total fixed costs Operating income 2b. Prepare income statement for August using the variable costing concept. Head Gear Inc. Variable Costing Income Statement For the Month Ended August 31 Sales 282,440 Variable cost of goods sold: Inventory, August 1 Variable cost of goods manufactured Total variable cost of goods sold Manufacturing margin $ Variable selling and administrative expenses Contribution margin Fixed costs: Fixed manufacturing costs Fixed selling and administrative expenses Total fixed costs 00 Operating income Feedback Check My Work Partially correct