Absorption and variable costing income statements for two months and analysis Instructions Labels and Amount Descriptions Absorption Costing Income Statement-May Instructions 1 Sales 2 Manufacturing costs: $858,000.00 3 Direct materials $408,800.00 4 Direct labor 128,800.00 5 Variable manufacturing cost 61,600.00 6 Fixed manufacturing cost 56,000.00 655,200.00 7 Selling and administrative expenses: 8 Variable $31,200.00 9 Fixed 26,000.00 57,200.00 During June, Big Sky Creations produced 48,000 designer cowboy boots and sold 52,000 cowboy boots. Operating data for June are summarized as follows: X Instructions During June, Big Sky Creations produced 48,000 designer cowboy boots and sold 52,000 cowboy boots. Operating data for June are summarized as follows: 1 Sales 2 Manufacturing costs: 3 Direct materials $858,000.00 $350,400.00 4 Direct labor 110,400.00 Variable manufacturing cost 52,800.00 6 Fixed manufacturing cost 56,000.00 569,600.00 7 Selling and administrative expenses: 8 Variable $31,200.00 9 Fixed 26,000.00 57,200.00 Required: 1 Using the absorption costing concept prepare income statements for (a) May and (b) June * X Instructions 6 Fixed manufacturing cost 56,000.00 569,600.00 7 Selling and administrative expenses: 8 Variable $31,200.00 9 Fixed 26,000.00 57,200.00 Required: 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.* 3a. Explain the reason for the differences in operating income in (1) and (2) for May. 3b. Explain the reason for the differences in operating income in (1) and (2) for June. 4. Based on your answers to (1) and (2), did Big Sky Creations Company operate more profitably in May or in June? Explain. * Be sure to complete the statement heading. Refer to the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon (:) will automatically appear if it is required. Enter amounts as positive numbers unless the amount is a calculation that results in a negative amount. For example: Net loss should be negative. Labels and Amount Descriptions Labels June 30 Cost of goods sold Fixed costs For the Month Ended June 30 For the Month Ended May 31 May 31 Variable cost of goods sold Amount Descriptions Contribution margin Contribution margin ratio Cost of goods manufactured Fixed manufacturing costs Fixed selling and administrative expenses Gross profit Operating income Inventory, June 1 = Labels and Amount Descriptions Fixed selling and administrative expenses Gross profit Operating income Inventory, June 1 Inventory, May 31 Operating loss Manufacturing margin Planned contribution margin Sales Sales mix Selling and administrative expenses Total cost of goods sold Total fixed costs Total variable cost of goods sold Variable cost of goods manufactured Variable selling and administrative expenses Absorption Costing Income Statement-May exact wording of the answer choices for text entries. A colon (:) will automatically appear if it is required. Enter amounts as positive numbers unless the amount is a calculation that results in a negative amount. For example: Net loss should be negative. 1 2 (Label) 3 4 5 6 7 8 Big Sky Creations Company Absorption Costing Income Statement (Label) Absorption Costing Income Statement-June 1b. Using the absorption costing concept, prepare income statements for June. Be sure to complete the statement heading. Refer to the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon (:) will automatically appear if it is required. Enter amounts as positive numbers unless the amount is a calculation that results in a negative amount. For example: Net loss should be negative. 1 2 (Label) 3 4 5 6 7 8 Big Sky Creations Company Absorption Costing Income Statement (Label) Variable Costing Income Statement-May 2a. Using the variable costing concept, prepare income statements for May. Be sure to complete the statement heading. Refer to the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon (:) will automatically appear if it is required. Enter amounts as positive numbers unless the amount is a calculation that results in a negative amount. For example: Net loss should be negative. 1 2 (Label) 3 4 5 6 7 8 Big Sky Creations Company Variable Costing Income Statement (Label) Variable Costing Income Statement-May 1 2 (Label) 3 4 5 6 7 8 9 (Label) 10 11 12 13 (Label) Absorption Costing Income Statement-June 1b. Using the absorption costing concept, prepare income statements for June. Be sure to complete the statement heading. Refer to the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon (:) will automatically appear if it is required. Enter amounts as positive numbers unless the amount is a calculation that results in a negative amount. For example: Net loss should be negative. 1 2 (Label) 3 4 5 6 7 8 Big Sky Creations Company Absorption Costing Income Statement (Label) Variable Costing Income Statement-May 2a. Using the variable costing concept, prepare income statements for May. Be sure to complete the statement heading. Refer to the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon (:) will automatically appear if it is required. Enter amounts as positive numbers unless the amount is a calculation that results in a negative amount. For example: Net loss should be negative. 1 2 (Label) 3 4 5 6 7 8 Big Sky Creations Company Variable Costing Income Statement (Label) Final Questions 3a. Explain the reason for the differences in operating income in (1) and (2) for May. For May, Operating income reported under expensed on the costing exceeds that reported under costing income statement, but not on the costing due to part of manufacturing costs that are costing income statement. 3b. Explain the reason for the differences in operating income in (1) and (2) for June. For June, Operating income reported under that are expensed on the costing is less than that reported under costing income statement, but not on the costing due to part of manufacturing costs from May costing income statement. 4. Based on your answers to (1) and (2), did Big Sky Creations Company operate more profitably in May or in June? Explain. Big Sky Creations Company was costing concept is due to allocating to the under the variable costing concept. The difference in operating income reported under the absorption