During the first month of operations ended July 31, Head Gear Inc. manufactured 28,400 hats, of which 26,400 were sold. Operating data for the month are summarized as follows: Line Item Description Amount Amount Sales $216,480 Manufacturing costs: Direct materials $133,480 Direct labor 34,080 Variable manufacturing cost 17,040 Fixed manufacturing cost 14,200 198,800 Selling and administrative expenses: Variable $10,560 Fixed 7,710 18,270 During August, Head Gear Inc. manufactured 24,400 hats and sold 26,400 hats. Operating data for August are summarized as follows: Line Item Description Amount Amount Sales $216,480 Manufacturing costs: Direct materials $114,680 Direct labor 29,280 Variable manufacturing cost 14,640 Fixed manufacturing cost 14,200 172,800 Selling and administrative expenses: Variable $10,560 Fixed 7,710 18,270 Required: Question Content Area 1a. Prepare income statement for July using the absorption costing concept. Head Gear Inc. Absorption Costing Income Statement For the Month Ended July 31 Line Item Description Amount Amount Sales $Sales 216,480 Cost of goods sold: Cost of goods manufactured $Cost of goods manufactured 198,800 Inventory, July 31 Inventory, July 31 Total cost of goods sold Total cost of goods sold Gross profit $Gross profit Selling and administrative expenses Selling and administrative expenses Operating income $Operating income Feedback Area Feedback 1a. Sales - (cost of goods manufactured - ending inventory*) = Gross profit; gross profit - selling and administrative expenses = operating income *(Manufactured Units - Sold units) x (total manufacturing costs/manufactured units) Question Content Area 1b. Prepare income statement for August using the absorption costing concept. Head Gear Inc. Absorption Costing Income Statement For the Month Ended August 31 Line Item Description Amount Amount Sales $Sales 216,480 Cost of goods sold: Inventory, August 1 $Inventory, August 1 66,560 Cost of goods manufactured Cost of goods manufactured 198,800 Total cost of goods sold Total cost of goods sold Gross profit $Gross profit Selling and administrative expenses Selling and administrative expenses Operating income $Operating income Feedback Area Feedback 1b. Sales - (cost of goods manufactured - ending inventory*) = Gross profit; gross profit - selling and administrative expenses = operating income *(Manufactured Units - Sold units) x (total manufacturing costs/manufactured units) Question Content Area 2a. Prepare income statement for July using the variable costing concept. Head Gear Inc. Variable Costing Income Statement For the Month Ended July 31 Line Item Description Amount Amount Sales $Sales 216,480 Variable cost of goods sold: Variable cost of goods manufactured $Variable cost of goods manufactured Inventory, July 31 Inventory, July 31 Total variable cost of goods sold Total variable cost of goods sold Manufacturing margin $Manufacturing margin Variable selling and administrative expenses Variable selling and administrative expenses Contribution margin $Contribution margin Fixed costs: Fixed manufacturing costs $Fixed manufacturing costs Fixed selling and administrative expenses Fixed selling and administrative expenses blank Total fixed costs blank Total fixed costs Operating income $Operating income Feedback Area Feedback Partially correct Question Content Area 2b. Prepare income statement for August using the variable costing concept. Head Gear Inc. Variable Costing Income Statement For the Month Ended August 31 Line Item Description Amount Amount Sales $Sales 216,480 Variable cost of goods sold: Inventory, August 1 $Inventory, August 1 Variable cost of goods manufactured Variable cost of goods manufactured Total variable cost of goods sold Total variable cost of goods sold Manufacturing margin $Manufacturing margin Variable selling and administrative expenses Variable selling and administrative expenses Contribution margin $Contribution margin Fixed costs: Fixed manufacturing costs $Fixed manufacturing costs Fixed selling and administrative expenses Fixed selling and administrative expenses blank Total fixed costs blank Total fixed costs Operating income $Operating income

Absorption and Variable Costing Inc nalysis During August, Head Gear Inc. manufactured 24,400 hats and sold 26,400 hats. Operating data for August are summarized as follows: 1a. Prepare income statement for July using the absorption costing concept. Feedback Check My Work 1a. Sales - (cost of goods manufactured - ending inventory ) Gross profit; gross profit - selling and administrative expenses = oper *(Manufactured Units - Sold units) x (total manufacturing costs/manufactured units) 1b. Prepare income statement for August using the absorption costing concept. Head Gear Inc. Check My Work 1b. Sales - (cost of goods manufactured - ending inventory ) = Gross profit; gross profit - selling and administrative expenses *(Manufactured Units - Sold units) x (total manufacturing costs/manufactured units) 2a. Prepare income statement for July using the variable costing concept. 2b. Prepare income statement for August using the variable costing concept. Head Gear Inc