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Absorption and Variable Costing Income Statements for Two Months and Analysis During the first month of operations ended July 31, Head Gear Inc. manufactured 22,100

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Absorption and Variable Costing Income Statements for Two Months and Analysis During the first month of operations ended July 31, Head Gear Inc. manufactured 22,100 hats, of which 20,600 were sold. Operating data for the month are summarized as follows: Sales $140,080 Manufacturing costs: Direct materials $86,190 Direct labor 22,100 Variable manufacturing cost 11,050 Fixed manufacturing cost 8,840 128,180 Selling and administrative expenses: Variable $6,180 Fixed 4,510 10,690 During August, Head Gear Inc. manufactured 19,100 hats and sold 20,600 hats. Operating data for August are summarized as follows: Sales $140,080 Manufacturing costs: Direct materials $74,490 Direct labor 19,100 Variable manufacturing cost 9,550 Fixed manufacturing cost 8,840 111,980 Selling and administrative expenses: Variable $6,180 Fixed 4,510 10,690 la. Prepare income statement for July using the absorption costing concept. Head Gear Inc. Absorption Costing Income Statement For the Month Ended July 31 Sales 140,080 Cost of goods sold: Cost of goods manufactured 128,180 Inventory, July 31 8,700 Total cost of goods sold Gross profit bio Selling and administrative expenses 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 Cost of goods sold: Inventory, August 1 Cost of goods manufactured Total cost of goods sold Gross profit Selling and administrative expenses Operating income GA 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 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 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 ID00 00 Fixed selling and administrative expenses Total fixed costs Operating income

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