Absorption and Variable Costing Income Statements for Two Months and Analysis During the first month of operations ended July 31, Head Gear Inc. manufactured 33,100 hats, of which 31,400 were sold. Operating data for the month are summarized as follows: $282,600 $168,810 43,030 Sales Manufacturing costs: Direct materials Direct labor Variable manufacturing cost Fixed manufacturing cost Selling and administrative expenses: Variable 19,860 16,550 248,250 $15,700 11,460 Fixed 27,160 During August, Head Gear Inc. manufactured 29,700 hats and sold 31,400 hats. Operating data for August are summarized as follows: Sales $282,600 Manufacturing costs: Direct materials $151,470 38,610 Direct labor 17,820 Variable manufacturing cost Fixed manufacturing cost Selling and administrative expenses: 16,550 224,450 Variable $15,700 11,460 Fixed 27,160 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 282,600 Cost of goods sold: Cost of goods manufactured Inventory, July 31 248,250 - 12,750 Total cost of goods sold 235,500 47.100 Gross profit Selling and administrative expenses 27,160 Operating income 19,940 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 282,600 Cost of goods sold: Inventory, August 1 0 Cost of goods manufactured 0 Total cost of goods sold 224,450 x Gross profit 58,150 X Selling and administrative expenses 27.160 Operating income 30,990 X 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 282,600 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 DQUQ Od 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 OQUQ Contribution margin Fixed costs: Fixed manufacturing costs Fixed selling and administrative expenses Total fixed costs Operating income