Absorption and Variable Costing Income Statements for Two Months and Analysis During the first month of operations ended July 31, Head Gear Inc, manufactured 35,600 hats, of which 33,500 were sold. Operating data for the month are summarized as follows: Sales $274,700 Manufacturing costs: Direct materials Direct labor Variable manufacturing cost $167,320 42,720 21,360 17,800 Fixed manufacturing cost Selling and administrative expenses: 249,200 Variable $13,400 9,780 Fixed 23,180 During August, Head Gear Inc. manufactured 31,400 hats and sold 33,500 hats. Operating data for August are summarized as follows: Sales $274,700 Manufacturing costs: Direct materials $147,580 Direct labor 37,680 Variable manufacturing cost 18,840 Fixed manufacturing cost 17,800. 221,900 eBook Show Me How Calculator 37,680 18,840 Direct labor Variable manufacturing cost Fixed manufacturing cost Selling and administrative expenses: Variable 17,800 221,900 $13,400 9,780 Fixed 23,180 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 Cost of goods sold: dropdown 1b. Prepare income statement for August using the absorption 8 Check My Work 1b. Prepare income statement for August using the absorption costing concept. Head Gear Inc. Absorption Costing Income Statement For the Month Ended August 31 Cost of goods sold: 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: Check My Work za. 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: 2b. Prepare income statement for August using the variable costing concept. Head Gear Inc. Variable Costing Income Statement For the Month Ended August 31 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: Fixed costs: dropdown 3. For Tulu anaratina incam Fixed costs: costing is less than costing due to part of 3a. For July, operating income reported under 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 (or decreases) in operating income as due to changes in: a. costs. b. prices. c. sales volume. d. "sales volume", "prices" and "costs are correct. e. None of these choices is correct. The correct answer is: 4. Based on your dropdown (1) and (2), did Head Gear Inc. operate more profitably in July or in August? Explain. Head Gear Inc. was costing concept is due to allocating under the variable costing concept. The difference in operating income reported under the absorption to the
